IT Stocks Index Down 20%: Infosys, TCS, and HCL Tech Extend Selloff
India’s IT stocks are facing one of their sharpest corrections in recent months. The Nifty IT index has fallen nearly 20 percent in February, wiping out billions in market value. Heavyweights like Infosys, Tata Consultancy Services, and HCL Technologies have extended their selloff as fears of artificial intelligence disruption, global slowdown, and weak client spending continue to grow.
The fall has raised a simple question among investors: Is this a temporary dip or the start of a deeper correction in IT stocks?
Let us break down the data, triggers, expert views, and what investors should watch next.
What Happened to IT Stocks in February
The Nifty IT index has dropped around 20 percent in February alone. This is one of the steepest monthly declines seen in the last few years.
Market data shows:
• Infosys shares corrected more than 18 percent from recent highs
• TCS declined around 15 to 17 percent during the selloff
• HCL Tech fell nearly 20 percent from its peak levels
• Midcap IT names saw even sharper declines of 22 to 28 percent
This broad based fall shows that the weakness is not limited to one company. The entire Indian IT services sector is under pressure.
Why is that happening? Investors are worried about slower technology spending in the United States and Europe. These regions contribute more than 70 percent of revenue for large Indian IT firms. If global clients cut budgets, revenue growth may slow further in FY 2025 and FY 2026.
Why IT Stocks Are Falling: Key Triggers Behind the 20% Drop
• AI disruption fears and automation reducing traditional IT outsourcing demand
• Weak guidance and cautious management commentary in recent earnings calls
• Slower deal wins in key verticals like banking, financial services, and retail
• Pressure on operating margins due to pricing cuts and higher employee costs
• Global macro concerns including US slowdown and delayed rate cuts
The biggest overhang right now is the rapid rise of artificial intelligence platforms. Many investors fear that AI tools could reduce demand for traditional coding, testing, and maintenance work.
However, experts say AI is also an opportunity. Companies that adapt fast may benefit from new AI driven contracts.
AI Disruption and the New Tech Order
Artificial intelligence has become both a risk and an opportunity for IT stocks.
Clients are asking IT firms to integrate AI into business processes. At the same time, AI tools can complete tasks that earlier required large teams.
Some analysts believe revenue growth for large IT firms may remain in the range of 3 to 6 percent for FY 2025, compared to double digit growth seen in the post pandemic boom.
Operating margins could stay in the 20 to 23 percent range for top players like TCS and Infosys, but any pricing pressure could reduce this further.
This is why terms like AI Stock research and AI stock analysis are trending among retail investors who want to understand which companies are best placed to benefit from AI transformation.
Company Specific Impact on Infosys, TCS, and HCL Tech
Infosys
Infosys has seen heavy selling pressure. The stock corrected sharply after cautious management commentary about demand recovery.
The company derives over 60 percent of its revenue from North America. Any slowdown there directly impacts growth.
Despite this, Infosys maintains strong cash reserves and continues investing in digital and AI capabilities.
Tata Consultancy Services
TCS remains the largest IT services company in India by market cap.
It has a diversified client base across BFSI, manufacturing, and healthcare. Still, investors are worried about deal conversion cycles becoming longer.
TCS margins remain stable, but revenue growth has moderated.
HCL Technologies
HCL Tech has exposure to engineering and R and D services. While this gives diversification, demand from global enterprises has slowed.
The company has maintained steady dividend payouts, which provides some cushion for long term investors.
How Global Markets Are Influencing IT Stocks? Indian IT companies earn a large part of revenue in dollars.
If the US economy slows, IT budgets are often the first to be cut. Recent US economic data has shown mixed signals.
Inflation remains sticky. Rate cut expectations have been pushed back. This creates uncertainty in tech spending.
At the same time, global technology giants are investing heavily in AI infrastructure. This shift could change outsourcing patterns.
Are Indian IT companies losing relevance? Not necessarily. Many global firms rely on Indian IT services for digital transformation projects. However, growth visibility has reduced in the short term.
Social Media Reaction to the IT Stocks Selloff
Market sentiment has turned cautious. On social media, investors are debating whether this is a buying opportunity.
A recent tweet by InvestorOfJAMMU highlighted the sharp fall in IT stocks and questioned whether AI disruption fears are overblown.
You can view the tweet here:
Such discussions show how retail participation has increased. Investors are closely tracking every movement in Infosys, TCS, and HCL Tech.
Valuation Check: Are IT Stocks Now Cheap
After the 20 percent correction, valuations have become more reasonable.
Before the fall:
• Large IT companies were trading at 25 to 30 times forward earnings
• Growth expectations were in the high single digits
After the fall:
• Price to earnings multiples have corrected closer to 20 to 24 times
• Dividend yields have improved slightly
This makes some investors believe the worst may already be priced in.
However, valuation comfort alone does not guarantee immediate recovery. Earnings visibility must improve.
Institutional Activity and FII Selling
Foreign institutional investors have been net sellers in recent weeks.
IT stocks often see heavy FII participation. When global funds reduce exposure to emerging markets, IT stocks feel the impact quickly.
Domestic institutional investors have provided some support, but selling pressure remains high.
Technical Analysis of IT Stocks Index
From a technical view, the Nifty IT index has broken below key support levels.
• The index is trading below its 200 day moving average
• Momentum indicators show oversold conditions
• Volatility has increased significantly
Some traders are using advanced trading tools to track support and resistance levels, as short term swings remain sharp.
If the index stabilizes above major support, a relief rally could follow. If not, further downside cannot be ruled out.
What Experts and Analysts Are Saying? Brokerages have revised target prices lower for many IT stocks.
Analysts expect:
• Revenue growth between 4 to 6 percent for FY 2025
• Margin stability but limited expansion
• Strong deal pipeline in AI and cloud, but slower conversion
Some experts suggest selective buying rather than aggressive accumulation.
They advise focusing on companies with:
• Strong balance sheets
• High cash flow
• Diversified client base
• Clear AI strategy
Risks and Opportunities for Investors in IT Stocks
• Risk of prolonged global slowdown impacting tech spending
• Risk of AI reducing traditional outsourcing revenue
• Currency fluctuations affecting margins
• Opportunity from AI led digital transformation
• Opportunity from cost optimization deals as clients seek efficiency
This correction has forced investors to re evaluate long term assumptions.
Long Term Outlook for IT Stocks
Despite the near term pain, the structural story of Indian IT remains strong.
India continues to produce a large pool of skilled engineers.
Digital transformation is still a multi year theme.
AI adoption may actually increase demand for consulting and integration services.
Over the next three to five years, growth may normalize rather than collapse. If earnings compound at 8 to 10 percent annually, current valuations may look attractive.
Investors should ask: Are they investing for one quarter or for five years?
Should You Buy the Dip in IT Stocks? There is no one size fits all answer.
Short term traders should remain cautious due to volatility.
Long term investors with a three to five year horizon may consider staggered buying.
Diversification is key. Avoid putting all capital into one stock.
Those using advanced data platforms and AI based screeners often track earnings revisions and order book strength before making decisions. This is where modern AI Stock tracking methods are gaining attention among retail investors.
Conclusion: What Lies Ahead for IT Stocks
The 20 percent fall in the IT index reflects fear, uncertainty, and shifting global tech dynamics.
Infosys, TCS, and HCL Tech remain strong companies with global presence and healthy balance sheets. Yet growth has slowed, and expectations have reset.
In the short term, volatility may continue. In the long term, companies that adapt to AI and digital transformation may emerge stronger.
For investors, patience and research matter more than panic. The correction in IT stocks is serious, but it also opens doors for disciplined and informed investment decisions.
FAQs
IT stocks are falling due to AI disruption fears, weak global tech spending, and cautious management guidance.
Slower deal conversions and US economic uncertainty have also hurt investor confidence.
Some analysts see value after the correction as valuations have cooled.
However, investors should wait for earnings stability and clearer growth signals before aggressive buying.
AI may reduce demand for traditional outsourcing work.
At the same time, it creates new opportunities in AI integration, cloud services, and digital transformation.
Recovery depends on global tech spending and US economic growth.
If demand improves and AI led deals increase, IT stocks may rebound gradually.
Track quarterly earnings, deal wins, margin trends, and global macro data.
Also monitor management commentary on AI strategy and client spending outlook.
Disclaimer
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.