Nifty IT Slides Over 10% From January Peak as AI Fears Trigger Sector Re-rating

Indian information technology stocks have entered a sharp correction phase, with the Nifty IT Index falling over 10 per cent from its early-January peak , as concerns over artificial intelligence-led disruption begin to weigh heavily on earnings expectations.

The index, which had climbed to around 39,000 levels in the first week of January , has since slipped to near 35,000 , marking one of its steepest declines in recent months. The sell-off intensified this week, with the index posting a single-day fall of more than 5 per cent , its worst session in over a year.

Heavyweights such as Tata Consultancy Services , Infosys , Wipro , HCL Technologies and Tech Mahindra have led the slide, each declining between 8 and 15 per cent from their January highs . The correction has erased a significant portion of the sector’s gains made in late 2025, when optimism around global tech spending and AI adoption had pushed valuations higher.

Analysts say the current decline reflects a structural reassessment of the IT services model , rather than a short-term market reaction. Investors are increasingly worried that generative AI and automation tools are reducing demand for traditional services such as application maintenance, testing and support segments that historically provided stable, volume-driven revenue for Indian firms.

Brokerage analysts note that global clients are cutting discretionary tech spending, renegotiating contracts and demanding outcome-based pricing , leading to concerns over revenue growth and margin sustainability. At the same time, companies are being forced to step up investments in AI platforms and employee reskilling, adding to cost pressures.

The sector’s weakness has also been compounded by diminishing expectations of near-term US interest rate cuts , following strong economic data, which has dampened sentiment for global technology stocks.

While some market experts believe the sell-off may be overdone in the short term , most agree that Indian IT stocks are undergoing a valuation reset , as AI disruption moves from theory to tangible business impact.