IT stocks tank

If IT stocks were the toast of the Street three days ago, they are today one of the biggest losers and is responsible largely for pulling down the overall market.

TCS, LTM, Persistent, Infosys, HCL, Wipro – the entire clan of IT stocks is down in the red. The Nifty Index fell over 6% in today’s session and the reason is rising concern around the AI threat, soft global demand and tensions in West Asia impact the market sentiment. 

The near-term pushback on Indian IT is increasingly centred on a simple concern: if AI makes software development materially cheaper and faster, the industry’s core revenue pool could face pricing pressure before incremental “AI projects” become large enough to offset it. Market participants are flagging that the risk is not adoption of AI itself, but the lag between margin compression in traditional application work and visible, scalable replacement revenues from AI-led programmes.

Flows are adding a second headwind. With global markets offering more direct, “cleaner” AI-earnings exposure in places like the US and parts of North Asia, Indian IT is facing a relative opportunity-cost problem. A Fortune India report citing Motilal Oswal Financial Services data noted foreign investors have cut technology allocation to an all-time low of 7.3% within Nifty-500 holdings in the March quarter of 2026. Until there is harder evidence of AI-driven revenue replacement, beyond narrative, street view is that IT rallies are likely to be sold into, keeping the risk-reward skew unfavourable in the short term.