In the month to February 24, the Nifty IT index plunged about 21 per cent, emerging as one of the worst-performing sectors in the domestic equity market
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PAUL NORONHA
Allocations to IT stocks by key institutional investors, including mutual funds and LIC, have seen a sharp erosion, with nearly one-fifth of their value wiped out so far in February. In the month to February 24, the Nifty IT index plunged about 21 per cent, emerging as one of the worst-performing sectors in the domestic equity market. The index constituents corrected between 17 per cent and 28 per cent during the period.
As of January 31, 2026, mutual funds held IT stocks worth ₹3.84 lakh crore. By February 24, this had declined to ₹3.03 lakh crore — a steep 21 per cent fall, translating into a notional erosion of over ₹81,000 crore.
LIC’s portfolio mirrors this trend. Its IT holdings dropped from ₹2.18 lakh crore to ₹1.73 lakh crore during the same period, also down 21 per cent, implying a value erosion of about ₹45,000 crore. For this analysis, mutual fund portfolio data as of January 31, 2026, was considered. For LIC, December 2025 shareholding data reflecting public disclosures of holdings above 1 per cent was used.
Broad-based fall
The correction has been broad-based, spanning both large-cap and mid-cap names. Among heavyweights, Infosys and TCS saw declines of 22 per cent and 18 per cent, respectively, in mutual fund portfolios. HCL Technologies and Tech Mahindra fell over 20 per cent. Mid-tier IT firms witnessed even sharper drawdowns — Coforge and KPIT Technologies were down 27 per cent, LTIMindtree fell 25 per cent, and Hexaware Technologies dropped a steep 32 per cent. LIC’s exposure reflects a similar pattern.
The sell-off comes amid rising disruption concerns linked to generative AI platforms and advanced models developed by companies such as Anthropic, which can automate coding, testing and support functions — core revenue streams for IT services firms.
A report by Citrini Research sketched out a scenario where companies such as Tata Consultancy Services, Infosys and Wipro could face contract cancellations through 2027.
Deflation risk
HSBC Global Research said it now expects a 14 – 16 per cent gross deflationary risk from AI over the next few years to overall sector revenues, compared with its earlier estimate of 8–10 per cent. Analysts led noted that while proactive companies may offset some of the pressure through alternative revenue streams and productivity gains, the near-term impact of AI-led pricing disruption could weigh on growth. The brokerage added that although US corporate results remain strong and the macro backdrop for IT spending in 2026 appears favourable, Indian IT valuations are not cheap in absolute terms, even if they look undemanding on a relative basis.
Published on February 24, 2026
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