Indian shares trail regional peers on $68.6 billion IT rout over AI concerns

By Bharath Rajeswaran

Feb 25 (Reuters) - Indian shares have lagged their Asian and emerging market peers so far in February, pressured by a $68.6 billion rout in the market value of ‌information technology stocks, as investors fretted over disruptions linked to artificial intelligence.

The Nifty 50 index ‌has risen 0.4% so far this month, while the Sensex edged 0.1% lower, underperforming both the MSCI Asia ex-Japan and ​MSCI Emerging Markets indexes.

The 10 Nifty IT constituents have lost a combined $68.6 billion in market capitalisation in February, as of the last close, with the index down 21% and on course for its worst monthly performance in nearly 23 years.

All 10 index members have fallen between 16.8% and 27% in February to date. Coforge ‌is the steepest percentage decliner, down ⁠26.8%, while Tata Consultancy Services and Infosys have led the value erosion, losing about $21.9 billion and $16.3 billion in market value, respectively.

The selloff reflects growing concerns that ⁠rapidly advancing automation tools could compress project timelines and disrupt the labour-intensive delivery model underpinning India's roughly $300-billion IT services industry.

Investors have zeroed in on the AI-driven automation push from U.S. firms such as Anthropic and Palantir, heightening ​concerns ​over faster project execution, pricing pressure and reduced billable ​hours.

Brokerages warn the Indian IT sector could ‌face further pressure if AI starts to eat into application services revenue, which typically accounts for 40% to 70% of total revenue for these companies.

"There are no easy answers to whether AI eventually renders IT services obsolete over the long term," said analysts led by Abhishek Pathak of Motilal Oswal.

"The narrative that AI is coming for not just IT but large swathes of the economy could be too strong ‌to shake, at least in the short term," Motilal ​Oswal analysts said.

A slowdown or contraction in India's IT sector, ​whether through layoffs or reduced hiring, can have ​immediate consequences on both residential and commercial real estate demand. The Nifty Realty ‌index has risen roughly 2% in February, ​following a nearly 18% decline ​over the past three months.

Concerns over Indian IT companies have also accelerated foreign selling in the sector in 2026 so far.

While FPIs have turned buyers of Indian stocks in February on ​an overall basis, they pulled out ‌about 110 billion rupees ($1.21 billion) from IT stocks in the first half of February, ​following a record 750 billion rupees of net selling in 2025.