Debasis Mohapatra
Bengaluru, 24 Feb 2026
Indian IT stocks are falling like playing cards. One report comes up in the US and the whole IT pack faces selling pressure like there is no tomorrow. Not only Indian IT services companies are facing the wrath of the market, the US technology stocks operating in the IT services, SaaS space are also facing severe selling pressure.
On Tuesday, the Nifty IT Index fell 4.74%, dragging the benchmark index Nifty by more than 1%. The index had lost 21% in last one month.
The reasons for this continuing selling pressure are many:
- Citrini Research Report:
US-based boutique research firm, Citrini came up with a report on Sunday, triggering severe selling pressure in many Nasdaq companies. The report imagined various scenarios taking into account accelerating adoption of AI across sectors. In a doomsday prediction, the report said that AI will continue to trigger white-collar layoffs in the United States, significantly impacting consumer spending and reducing economic growth. In an extreme prediction, it noted that AI’s impact may lead to recession in white collar jobs with potential adverse impact on the US economy.
On India, the report also painted a potential doomsday scenario. “The entire model (of India’s IT services sector) was built on one value proposition: Indian developers cost a fraction of their American counterparts. But the marginal cost of an AI coding agent had collapsed to, essentially, the cost of electricity,” the report said. It went on to paint a scenario in which India, the 4th largest global economy, may hold discussions with IMF for stabilising the economy owing to serious business loss of its $280 billion IT sector.
Such dooms day prediction spooked the US market on Monday and led to more than 4% fall in Nifty IT Index.
Anthropic’s continued new launch & announcements:
Earlier Anthropic’s 11 plugins had led to fall in stocks of all IT services companies globally. This time, Anthropic made an announcement that its Claude Code tool could help modernise legacy COBOL systems running on IBM mainframes. Modernizing COBOL code has always been a time-consuming and highly technical process. However, Anthropic claimed that businesses can now update their COBOL code more quickly and affordably through its AI tool. This sparked a sell off in IBM’s shares, which plummeted by a massive 13.2% to finish the day at $223.35 per share on Monday. Such event definitely had a sentimental impact on investors in India.
Jefferies downgrades Indian IT companies:
Brokerage firm, Jefferies has come up with a report, downgrading many large and mid-tier IT firms citing possible earning risk. Infosys, HCL Technologies (HCLT) and Mphasis was put on its ‘hold’ list, while LTI MindTree, Tata Consultancy Services (TCS) and Hexaware have been downgraded to ‘underperform’.
“The rising share of advisory and implementation engagements would not only increase the cyclicality in revenue growth, but will also demand an overhaul of talent strategy and operating models. Such changes in operating models are not easy to execute and investors must factor in this risk in PE multiples,” the note said as per reports.
Nobody knows:
Uncertainty plays out in investors’ mind as conflicting reports, view points and opinions are constantly being aired by multiple stakeholders. While AI platform companies are making tall claims; IT services & SaaS firms are contradicting it. Brokerage firms are severely divided in their opinions about how the AI technology wave will play out. Such uncertainty is prompting investors to sit at the fence and wait till the dust settles.
