Top six IT stocks tumble up to 31% YTD, erasing nearly ₹7 lakh crore in m-cap; analysts see long-term opportunity

India’s information technology sector has witnessed a sharp correction in 2026, with the country’s six largest IT companies collectively losing nearly ₹7 lakh crore in market capitalisation amid a broad sell-off in technology stocks and rising concerns around artificial intelligence (AI)-led disruption. The correction has been intensified by broader market weakness following the war in West Asia, the steady depreciation of the rupee, and fears that elevated crude oil prices could weigh on India’s economic growth and corporate earnings.

The downturn has dragged the Nifty IT index down 23% year-to-date (YTD) as of March 13, compared with an 11% fall in the Nifty50 index during the same period, reflecting sustained selling pressure across major IT counters. The steep decline follows a dramatic plunge in February, when the index dropped nearly 21% in a single month - its worst monthly performance in over two decades - wiping out more than ₹6.4 lakh crore in investor wealth during the period.

Broad-based selling across IT heavyweights

Among the IT sector’s heavyweights, Tata Consultancy Services has seen the largest erosion in market value. The country’s most valued IT stocks saw its market value dropping by nearly ₹2.95 lakh crore, from about ₹11.67 lakh crore on January 1 to ₹8.72 lakh crore by March 14, as its stock price declined more than 25% during the period.

Infosys followed with a decline of roughly ₹1.54 lakh crore in market value, while HCL Technologies lost around ₹84,096 crore.

Other IT firms were not spared. Wipro saw its market capitalisation drop by ₹73,122 crore, while LTIMindtree recorded the steepest percentage decline among the top companies, with its stock falling over 31%, translating into a market cap loss of ₹56,518 crore.

Meanwhile, Tech Mahindra experienced a relatively smaller decline, shedding about ₹26,944 crore in market value during the period.

AI disruption fears dominate sentiment

A major factor behind the sell-off has been rising concerns that advanced artificial intelligence tools could disrupt traditional outsourcing models that have powered India’s IT services industry for decades.

Markets have increasingly priced in risks that sophisticated AI systems, such as Claude developed by Anthropic, may automate several conventional IT services. This has raised fears that global clients could reduce outsourcing spending or renegotiate contracts, potentially impacting growth through the second half of the decade.

Analysts also point to a possible structural shift in the industry - from a human effort-based billing model to AI-driven outcome-based delivery frameworks - which could compress revenues and margins for traditional IT service providers over time.

Adding to the pressure has been the broader weakness in global technology stocks, particularly the Nasdaq Composite, which has triggered a spillover effect on Indian IT shares and American depositary receipts of Indian tech firms.

Market may have overreacted

Despite the sharp correction, several analysts believe the market reaction may be excessive. Brokerage Emkay Global Financial Services noted that valuations in the IT sector have become increasingly attractive following the sell-off.

According to the brokerage, the market appears to have overreacted to the perceived AI threat, even though the sector’s long-term growth trajectory remains intact. While structural growth may moderate to below 5% annually, the brokerage argues that fears of a severe contraction in the industry are exaggerated.

Emkay warned that a worst-case collapse in IT services would have far-reaching consequences for India’s broader economy. IT exports currently account for about 645% of the country’s current account deficit, while the sector contributes a significant share of wages among the top listed companies. However, the brokerage considers such a scenario highly unlikely.

Instead, it expects technology hiring—including global capability centres—to grow modestly in the 0–3% range, while the adoption of consumer-facing AI could ultimately generate macroeconomic benefits similar to those created by the mobile internet revolution.

The brokerage also believes Indian internet companies and telecom operators could emerge as major beneficiaries of AI-led cost efficiencies, while sectors such as banking and financial services may adopt these technologies more gradually due to regulatory constraints and legacy systems.

Valuations becoming attractive

Analyst also see the current correction as a potential entry opportunity for long-term investors. According to Balaji Rao Mudili, Research Analyst at Bonanza Portfolio, the sharp fall in the Nifty IT index is largely a reaction to uncertainty rather than a clear indication of structural deterioration in global technology spending.

He noted that markets often overreact to disruptive technological shifts, citing historical fears around blockchain that were once expected to disrupt the banking industry but eventually led to adaptation rather than displacement.

Mudili also pointed to comments by Jensen Huang, chief executive of Nvidia, who recently argued that AI agents are more likely to increase the use of software tools rather than replace them, potentially boosting efficiency and expanding demand for enterprise software.

Staggered investment strategy advised

While he believes the long-term outlook remains intact, they caution that volatility may persist in the near term as investors seek clarity on demand trends and the real impact of AI adoption.

Mudili advises investors to avoid aggressive buying and instead adopt a staggered accumulation strategy, gradually building positions in fundamentally strong companies as valuations improve.

“After a steep correction, downside risks appear limited while the potential for long-term upside remains strong,” he said. “Earnings visibility and demand recovery will ultimately determine the sector’s turnaround.”

For now, the IT sector may remain under pressure, but the sharp valuation reset is beginning to draw attention from long-term investors looking for opportunities in India’s technology landscape.