The bloodbath in IT stocks showed signs of easing as the gauge tracking Indian tech companies extended gains on Tuesday, February 17, amid low-level buying.
Several bullish investors are now using the recent tech rout — which wiped out ₹4.85 lakh crore in market capitalization of Nifty IT firms since Anthropic’s February 3 announcement — as a buying opportunity.
The tech selloff, which began on February 4, has dragged the Nifty IT index 15% down and put it on track for the worst monthly fall since March 2020.
Nifty IT rebounds
However, the Nifty IT index jumped another 2% to 33,496 today, extending the mild gains of 0.17% seen a day ago. All index constituents joined the rally. Infosys shares emerged as the top gainer today with a 3% rise as they reversed course following a 17.5% decline from February 3-16.
It was joined by other index heavyweights like Tata Consultancy Services (TCS), HCL Technologies, Wipro and Tech Mahindra as they gained over 1% each after falling 12-16% in just nine trading sessions.
According to data from Capitaline, TCS lost the most among all IT stocks at ₹1,87,670 crore in terms of m-cap during this period, so much so that the tech selloff pushed the ₹10 lakh crore club”>company out of the ₹10 lakh crore club. Infosys was close behind with ₹1,17,747 crore notional loss.
Is the worst over for IT stocks?
As the IT stocks rebound, it has brought focus on the sector’s resilience, with investors debating whether the worst is over.
According to a Bloomberg report, analysts at HSBC Holdings Plc and JPMorgan Chase & Co. say worries may be overdone, as Indian IT firms stand to gain from more customers requiring help integrating artificial intelligence into their operations.
For FY25, large-cap IT companies reported revenue growth in the 2–4% range in constant currency terms, a far cry from the double-digit expansion seen during the post-Covid digital boom. But over the medium term, AI-led transformation, cloud migration, cybersecurity and data engineering offer incremental revenue pools, said Harshal Dasani of INVAsset PMS.
He added that the sector may not see a V-shaped recovery, but the worst of the earnings downgrade cycle appears priced in, making the risk-reward more balanced than it was a year ago.
Market veteran Sunil Subramaniam also believes that the worst of the fall is already behind us, and booking profits now will only convert their paper loss into cash loss. He believes that the Al-led disruption was overblown by the stock market reaction.
Commenting on the IT sector outlook, Subramaniam said that as days progress, Indian IT companies will be a major part of the revolution, as they adapt their business models to the evolving conditions.
However, not everyone is convinced of the story. Amid a period of prolonged subdued growth, as AI-driven capital shifts toward infrastructure and AI software, ICICI Securities expects further derating in valuation multiples for IT services stocks.
Large-cap IT is trading at 18x FY27E EPS, well above historical troughs like the 11–12x seen during the global financial crisis (GFC) and the initial Covid-19 outburst, or the 15–17x average of the FY13–17 slowdown.
IT services may see a growth surge once AI-driven demand outpaces its deflationary effects—but even three years into the AI wave, that tipping point remains elusive, the brokerage opined in a note on February 16.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.
