IT stocks set for worst week since March 2020: Panic selling at this stage may not be a good idea, says analyst

IT stocks set for worst week since March 2020: Panic selling at this stage may not be a good idea, says analyst

• IT stocks face worst week since March 2020, down 10.8% this week
• Analyst advises against panic selling during market volatility
• AI-driven automation fears hit Indian IT stocks, major firms fall

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With IT stocks on course for their worst week since March 2020, an analyst said panic selling at this stage might not be a good idea.

"Markets have fallen into a turbulent phase which will cause some panic among investors even while offering opportunities. The sell off in AI stocks in US markets was expected but the timing and extent of the sell-off was not known. The 2.04% decline in Nasdaq is not a crash. But if the downtrend continues it might pull the US market down. For the Indian market, this correction in AI stocks is a positive, because last year’s global rally was primarily an AI trade in which India, an AI laggard, couldn’t participate. So the unwinding of the AI trade, If it persists, is a positive from the Indian perspective. However, what is rattling the Indian market now is the massive sell-off in IT stocks, which is the second largest profit pool of India Inc. The real impact of the ‘Anthropic shock’ on the IT sector is yet to be ascertained. Panic selling in IT stocks at this stage may not be a good idea. Investors may wait and watch for the dust to settle," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

The IT index fell for its third straight session on February 13 by declining a whopping 5% on intensifying fears of AI-driven automation disrupting Indian IT's labour-intensive business model. The sectoral index declined 5.5% on February 12.

The tech-heavy Nasdaq Composite index fell more than 2% on Thursday ahead of US inflation data, due later on Friday, which could influence the future path of rates.

Stronger-than-expected US jobs data in January has dented expectations of a near-term rate cut.

The sectoral index is down 17% so far in 2026.

10-member Nifty IT index declined 4.75% on February 13, extending weekly losses to 10.8%. The IT index is set for worst week since March 2020.

Indian IT sell-off started on February 4 after Anthropic announced a new AI tool.

Heavyweights Tata Consultancy Services, Infosys and HCLTech were biggest drags on Friday, down 4.88%, 6.28%, and 4.66%, respectively.

Asian shares retreated from record highs on Friday as worries about shrinking margins in the tech sector hit the likes of Apple.

"Any pullback of CNXIT toward 35,500–36,500 may continue to be viewed as a sell-on-rise opportunity unless the index reclaims the 37,500–38,000 resistance band," said Tushar Badjate, Director of Badjate Stock & shares Pvt Ltd.

Sat Duhra, portfolio manager at Henderson Far East Income, said AI presents opportunities that Indian IT companies should tap into. "I think the companies probably haven't done the greatest job in terms of communicating how they turn that into an opportunity rather than a threat," Duhra said.

Analysts at JPMorgan flagged investor concerns that India's IT firms could miss growth targets as AI pushes clients to reallocate spending.

The brokerage, however, noted that it’s "overly simplistic" to assume that AI can automatically generate enterprise grade software and replace the value IT Services firms create across the cycle.

"IT Services companies remain the plumbers in the tech world, and if enterprise software/SaaS is rewritten on a bespoke basis by agents - it will need significant services plumbing to work in enterprise context and minimize AI slop."