The BSE Information Technology index declined 1.18% to 28,260.34 in the latest trading session, extending the sector's recent weakness as AI-related concerns continue to weigh on investor sentiment. According to Business Standard, Newgen Software Technologies Ltd lost 4.65% to trade at ₹493.1, while VL E-Governance & IT Solutions Ltd decreased 4.35% and Dynacons Systems & Solutions Ltd lost 3.84% on the day. The latest decline follows the Nifty IT index's 5.6% crash on Wednesday as reported by Upstox Securities, which marked the biggest single-day fall since April 25, 2026 after gaining nearly 8% in three consecutive sessions. The BSE Information Technology index has fallen 22.7% over the last one year compared to the 4% drop in the benchmark SENSEX, highlighting the sector's underperformance relative to broader markets.
The Nifty IT index crashed 5.6% on Wednesday as investors booked profits after a sharp rally in technology stocks over the previous three sessions. The Nifty IT index had surged 7.6% in three consecutive sessions before the current decline, according to Business Standard. TCS shares plunged 8.3% in intra-day deals, hitting a 52-week low of ₹2,242 at its lowest level since August 28, 2020, marking its biggest single-day fall since March 13, 2020. The Nifty IT index recorded the steepest single-day drop since February 4, 2026, with the market capitalisation of index constituents declining by nearly ₹1.5 trillion. According to Choice Institutional Equities, the rally was supported by improving global software sentiment and expanding enterprise AI adoption, but the recent profit booking and technical reversal have weighed on the sector. LTIMindtree (formerly LTM) shares fell 8%, Persistent Systems, Tech Mahindra and Coforge dropped 6% each, and HCL Technologies and Infosys declined 4% each. All 10 index constituents of the Nifty IT pack traded significantly lower in today's session.
The BSE Information Technology index ended down 1.18% to 28,260.34 in the latest session, as reported by Business Standard. Among individual constituents, Newgen Software Technologies Ltd lost 4.65% to trade at ₹493.1, while VL E-Governance & IT Solutions Ltd decreased 4.35% and Dynacons Systems & Solutions Ltd lost 3.84%. The BSE Information Technology index has fallen 22.7% over the last one year compared to the 4% drop in the benchmark SENSEX. On the trading front, 32,785 shares were traded in Newgen Software Technologies compared with average daily volumes of 2.2 lakh shares in the past one month. The stock has hit a record high of ₹1,335.7 on June 5, 2025, and a 52-week low of ₹401.05 on March 30, 2026. Other sectoral indices showed mixed performance, with the Nifty PSU Bank index gaining 1.70% and the Nifty Realty index down 1.39% on the day.
Despite the sharp decline, market participants continue to remain positive on the sector's long-term prospects, citing growing enterprise spending on artificial intelligence, cloud infrastructure and digital transformation initiatives. Recent optimism was reinforced by strong commentary from global technology companies on AI-related demand. However, several brokerages remain cautious about near-term challenges. Kranthi Bathini of Wealthmills Securities noted that Indian IT companies are trading near their historical average valuations, and in some cases even below their long-term average price-to-earnings multiples, which attracted buying interest at lower levels. However, Kotak Institutional Equities said its outlook on the sector had turned "incrementally negative," warning that the risk of AI-driven revenue deflation could intensify over the next few years. Analysts led by Kawaljeet Saluja noted that "we expect new opportunities such as legacy modernisation to increase, but do not expect them to compensate for the deflation enough." Harshal Dasani, Business Head at INVasset PMS, called the recent IT stock move a "dead cat bounce, not the start of a durable reversal," emphasizing that when a sector is delivering low single-digit growth and still trades at mid-to-high teen earnings multiples, the margin for error is thin. Kotak Institutional Equities highlighted that "a significant portion of the tech spending increase gets consumed by technology price inflation and higher cloud and software consumption that cannot be addressed by Indian IT, which weakens the translation of the spending increase in technology to spending increase with third-party providers." The risk of AI deflation has made IT one of the most unpopular investment choices, with India emerging as an "anti-AI trade" as software development becomes cheaper and faster, potentially causing bigger losses from lower pricing than gains from new AI projects.
Chokkalingam G, founder of Equinomics, noted that the wealth-creation phase for large-cap IT stocks may largely be behind them, though the sector could continue to offer tactical trading opportunities. "These are large, liquid companies, and sentiment can periodically swing in their favour. But structurally, the industry's growth prospects have slowed considerably. Earlier, the sector was capable of delivering much higher growth rates; now, growth is likely to remain in the low single digits, around 0-3 per cent. In that sense, these companies risk evolving into mature businesses that generate steady cash flows and return capital to shareholders, rather than delivering strong revenue growth and significant wealth creation," he explained. The decline wiped out most of the gains accumulated over the previous three sessions, with investor sentiment turning cautious following weakness in US technology stocks overnight. The Nifty IT index is down 22.4% so far in 2026 amid concerns that AI-driven productivity gains could reduce demand for traditional outsourcing services. Ajit Mishra of Religare Broking noted that the severe declines and high volumes suggest the sector is under tremendous pressure due to uncertainty, while Siddarth Bhamre of Asit C Mehta Intermediates said the scar of AI disruption on IT stocks is deep as valuations for large caps have corrected significantly. However, he added that it's not expected to get deeper as the worst seems to be behind for the space, with Sriram Velayudhan of IIFL Capital Services noting that while valuations have become attractive, AI-related news flows could weigh on the sector in the short term.
