3 min readNew DelhiFeb 28, 2026 05:16 AM IST
India’s stock market ended a volatile February lower by over half a percent, as an early rally sparked by the long-awaited India-US trade agreement was wiped out by a sharp sell-off in the IT sector later in the month.
The benchmark Nifty 50 had surged 4.5% in the eight sessions following the trade deal announcement, recovering losses triggered by a lukewarm Union Budget. Investor sentiment had soured after the Budget proposed a hike in the securities transaction tax on derivatives, sparking a market meltdown.
But the rebound proved fleeting as IT stocks tumbled after US-based AI firm Anthropic said on February 3 that its Claude AI tool could automate a range of entry-level tasks, including coding. The announcement amplified concerns that Indian IT services providers could face significant business disruption.
The sell-off persisted through the month as further updates from Anthropic, coupled with a note from US-based research firm Citrini Research, painted a stark picture for the sector.
The report argued that cost of deploying AI coding agents may fall to “essentially the cost of electricity,” potentially challenging the long-standing outsourcing-driven models of industry heavyweights such as TCS and Wipro.
As a result, the Nifty IT slumped over 19.5% in February, marking its steepest monthly decline in 23 years.
Shares of TCS, Wipro and Infosys fell between 15% and 21%, with most IT services firms hitting 52-week lows.
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The sell-off echoed in the US, where the tech-heavy Nasdaq Composite slipped 2.5% during the month.
Despite the sharp correction, analysts maintained that the market reaction may have been excessive, noting that AI tools are still evolving and unlikely to immediately displace large-scale IT outsourcing.
The episode underscored deep investor anxiety over likely revenue pressures and job losses in a sector that has been one of India Inc’s most profitable and its largest private-sector employer.
In February, India hosted the AI Summit, where top global leaders and officials discussed the possibilities amid uncertain times.
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Leaders from global IT majors stressed the importance of humans monitoring AI, rather than AI making jobs obsolete.
It saw a host of smaller AI-related Indian firms sign partnerships with giants such as Nvidia, which sent their shares soaring.
Of the NSE’s 14 major sectoral indices, only three ended lower, with Nifty FMCG and Nifty Realty dropping marginally alongside Nifty IT’s big fall. Meanwhile, public-sector banks, pharmaceuticals, and healthcare indices saw highest gains.
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