Nifty IT index plunged to a four-month low on Thursday as mounting concerns over artificial intelligence-led disruption and fading expectations of a near-term U.S. Federal Reserve rate cut triggered a sharp selloff in Indian technology stocks. The decline weighed heavily on benchmark indices, underscoring the sector’s vulnerability to global economic and technological shifts.
Shares of major Indian IT companies tumbled more than 4%, extending weekly losses. Tata Consultancy Services (TCS), Infosys and HCLTech dropped between 3.7% and 4.4%, making the 10-stock Nifty IT sub-index the worst-performing sector both for the day and the year.
The index has fallen 12.6% in 2025 and is down 11.4% so far in 2026, reflecting sustained pressure on the sector.
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AI Advancements Spark Demand Concerns
Global technology stocks have been under strain following the launch of Anthropic’s Claude Cowork AI tool, backed by Amazon and Google. The tool is designed to automate tasks across legal, sales, marketing and data analysis functions areas traditionally reliant on human-driven IT services.
Anthropic also unveiled an upgraded version of its Claude artificial intelligence model, capable of handling tasks for longer durations with improved reliability and stronger performance in coding and finance.
These developments have intensified fears that automation could reduce demand for labour-intensive IT services. Indian IT firms, which operate on workforce-heavy business models that deploy large teams to execute client projects, are particularly exposed to such disruption.
Since February 4, when the latest wave of selling began, Indian IT stocks have shed 13%. The downturn has also reshuffled market rankings, with TCS slipping from its position as India’s fourth-most valuable company to sixth place.
U.S. Rate Cut Hopes Diminish
Investor sentiment was further dampened by stronger-than-expected U.S. labour market data. Job growth accelerated unexpectedly in January, while the unemployment rate declined, reducing the likelihood of an imminent interest rate cut by the Federal Reserve.
Rate cuts are widely viewed as a critical catalyst for reviving global IT spending, which has remained subdued amid economic uncertainty. The fading prospects of monetary easing in the world’s largest economy added to pressure on Indian IT exporters, for whom the U.S. remains a key revenue market.
Broader Market Impact
The selloff in the Nifty IT index spilled over into broader markets. The Nifty 50 fell 0.4%, while the BSE Sensex declined 0.44%, reflecting the heavyweight sector’s influence on overall market performance.
With uncertainty surrounding both technological disruption and global monetary policy, analysts expect volatility in IT stocks to persist in the near term.