Bears tighten grip on IT stocks; Nifty IT plunges 10,000 points from February peak amid AI disruption fears

Nifty IT index outlook

• Nifty IT plunges 10,000 points from February peak amid AI disruption fears
• Experts see no clear signal of selling pause
• Momentum indicators maintained a sell signal and consistently showed the Nifty IT index in oversold territory

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The Nifty IT index was the major loser among sectoral indices and underperformed the benchmark Nifty 50 index, plunging 26 percent, or over 10,000 points, from its February 2026 peak as Artificial Intelligence (AI)-led disruption fears mounted pressure on domestic IT names. During the same period, the Nifty 50 fell nearly 4 percent.

Technically, the Nifty IT index traded below all key moving averages (20, 50, 100, and 200 EMAs) on both the daily and weekly timeframes. On the monthly charts, it had already fallen below short- and medium-term moving averages, all of which were trending downward. Furthermore, it traded below the lower Bollinger Bands on the weekly and monthly timeframes. All of this signals that bears are in tight control.

Momentum indicators maintained a sell signal and consistently showed the Nifty IT index in oversold territory. However, experts do not see any indication of a pause in selling and expect the fall to extend toward the 28,000–27,000 levels in the short term.

Markets fear that new enterprise tools such as Anthropic’s Claude Code, Palantir AIP, and Anysphere's Cursor may impact the revenue models of traditional Indian IT companies. Global clients are expected to continue recalibrating discretionary spending amid AI-led cost optimization and macroeconomic caution in the US and Europe. Large-cap IT companies are also likely to face slower deal conversion cycles and pricing pressure as enterprises prioritize efficiency over expansion.

The current correction or volatility in AI-linked trades should be seen as a normal phase in price discovery rather than a collapse of the theme itself. However, this does not negate the long-term transformative potential of AI, said Anil Rego, Founder and Fund Manager at Right Horizons PMS.

The daily RSI, at 15.59, has been falling since the start of February and hit its lowest level since COVID. The MACD also remained below the signal line and the zero line for almost the entire month, while the histogram has remained below the zero line since mid-December 2025, barring 4–5 sessions.

The IT benchmark index fell below a long upward-sloping trendline as well as a downward-sloping support trendline (which coincided with the break of a head-and-shoulders pattern), further tightening bears’ control.

The index corrected 4.74 percent amid high volumes on Tuesday to 30,053, the lowest closing level since August 3, 2023, after a gap-down opening. It failed to defend the April 7, 2025 low of 30,900. It has declined 21 percent in the current calendar year, indicating bearish sentiment within the sector.

"Although the index has fallen sharply and several indicators have entered the oversold zone, there is no clear signal yet that the selling is about to stop," said Rupak De, Senior Technical Analyst at LKP Securities.

In fact, sentiment is so weak that any meaningful rise is likely to be sold into, he added.

According to him, on the lower end, the index may extend its decline toward 27,800/23,550. On the higher end, sentiment is likely to improve only if it moves above 34,000.

Osho Krishan, Chief Manager – Technical & Derivative Research at Angle One, said that the fall below the critical support levels situated within the 32,500–32,000 range suggests further downward movement may occur given the prevailing conditions.

"The intermediate support is projected to emerge around the 29,000–28,700 zone, which is expected to mitigate the anticipated decline in the short term, while the sacrosanct historical support level is identified at approximately 27,000," he said.

Conversely, the breakdown neckline within the 32,000–32,500 range is likely to serve as an immediate obstacle; a breach above this level could potentially counteract the current negative momentum, he added.