Nifty IT index experienced its worst monthly decline in 23 years this February, plunging 21% (erasing roughly $68 billion in market value). While the index saw a minor 2.45% relief rally in the final three days of the month, the overall sentiment remains at a historic low.
The “Anthropic Shock”: The Primary Trigger
The sell-off was ignited on February 3, 2026, when the U.S.-based AI firm Anthropic announced that its latest Claude AI tools could automate entry-level tasks like coding and COBOL maintenance.
- The Fear: Investors worry that the “labor-intensive” outsourcing model—where Indian firms bill by the hour for manual coding—is being fundamentally broken.
- The “Cost of Electricity” Threat: A report from Citrini Research argued that AI “coding agents” could eventually reduce the cost of software development to the price of electricity, potentially making traditional IT services obsolete.
Key Market Casualties
The carnage was widespread, with almost every major IT firm hitting 52-week lows during the third week of February.
| Company | Approx. February Decline | Milestone Reached |
| Infosys | -21% | Slipped below historical support to ~₹1,265. |
| Wipro | -19% | Hit a multi-year low of ~₹200. |
| TCS | -15% | Market cap dipped as share price tested ₹2,561. |
| Coforge | -24% | Saw the steepest percentage drop in the index. |
Why the Sell-Off Became a “Rout”
- FII Exodus: Foreign Institutional Investors (FIIs) pulled over ₹10,956 crore from the Indian IT sector in the first half of February alone, reallocating capital to U.S.-listed “Pure AI” stocks like Nvidia and OpenAI-linked entities.
- U.S. Macro Pressure: Stronger-than-expected U.S. jobs data led to fears that interest rates would remain “higher for longer.” High rates typically devalue growth stocks like IT, as they compress the value of future earnings.
- Revenue Cannibalization: Concerns grew that even if Indian firms adopt AI, they will be forced to offer it to clients for free or at a massive discount, leading to a “race to the bottom” for pricing.
The “Contrarian” View
Despite the crash, some analysts (including those at Geojit and Motilal Oswal) argue the reaction is a “valuation reset” rather than a death knell. With the Nifty IT P/E ratio now below its 10-year average, long-term investors are beginning to see the sector as a “tactical buy,” betting that Indian firms will successfully pivot to becoming “AI orchestrators.”
