Information technology stocks have experienced a significant decline, falling up to 34 per cent year-to-date in 2026, according to reports from Business Standard. This performance contrasts sharply with the Nifty50's 9 per cent drop, highlighting the sector-specific challenges facing Indian IT companies. The decline stems from artificial intelligence-led growth disrupting the traditional outsourcing model that has historically been the core revenue driver for Indian IT services companies.
While global technology spending continues to grow at 10-13 per cent, Indian IT services growth has slowed significantly to around 3-4 per cent, as reported by Business Standard. This deceleration occurs as enterprises redirect technology budgets toward AI infrastructure, models and software rather than traditional outsourcing and application maintenance. The shift means less money remains available for traditional IT services companies, resulting in slower growth, increased competition, and pressure on consumption and pricing.
During the March quarter (Q4FY26), TCS reported Q4 deal wins of $12 billion, taking FY26 total contract values (TCV) to $40.7 billion, according to Business Standard. The company's revenue rose 5.4 per cent sequentially in rupee terms, while annualised AI revenue crossed $2.3 billion. Infosys signed 96 large deals worth $15 billion in FY26, up 28 per cent year-on-year, and guided for 1.5-3.5 per cent revenue growth in FY27 with operating margins of 20-22 per cent.
Analysts remain cautious about the FY27 outlook, with Mirae Asset ShareKhan's Manav Medewala noting that despite strong deal pipelines and rising TCV, conversion into revenue remains slow due to pilot-led deployments and elongated decision cycles. Despite good-quality stocks being available at reasonable valuations, analysts suggest investors may need patience as AI reshapes the industry faster than revenue growth is catching up. Kotak Securities' Sumit Pokharna recommends Infosys, TCS, and Coforge as preferred bets, while LKP Securities' Anshul Jethi suggests HCL Tech and Persistent Systems as preferred picks in the IT sector.
