Nifty IT plunges over 5% amid AI disruption fears, US rate cut uncertainty
Market expert Avinash Gorakshakar said the sector is entering a more competitive phase where scale and capability will determine survival.
- Feb 12, 2026,
- Updated Feb 12, 2026 11:22 PM IST
Technology stocks came under intense selling pressure on Thursday, dragging the Nifty IT sub-index down 5.51 per cent amid concerns over rising disruption from artificial intelligence (AI) and fading hopes of a near-term rate cut by the US Federal Reserve.
Market expert Avinash Gorakshakar said the sector is entering a more competitive phase where scale and capability will determine survival. "For the IT sector, one needs to understand that it is exactly like the survival of the fittest. Larger players are more likely to survive in the AI era, while the smaller ones may find it a little tougher," market expert Avinash Gorakshakar told Business Today.
"There will be a lot of upskilling required for employees, especially at the entry level. Those in the higher-end category may not be impacted as much. Indian companies, by nature, are quite competitive on costs. So, it is unlikely that there will be mass layoffs across many companies. We continue to remain positive on larger companies like TCS, Infosys, HCL Technologies and Persistent Systems. These companies have very strong domain knowledge across the entire business chain, which is highly competitive. However, one should also understand that such events create a level of panic and uncertainty for some time," he added.
"My view is that Indian IT companies are quite strong. Of course, those who want to invest now should take a long-term view (12–18 months) if they are looking for better risk-reward. In the short term, volatility will continue because there is a lot of noise in the market, which creates uncertainty. But fundamentally, these companies appear to be quite solid," Gorakshakar stated.
Vinod Nair, Head of Research at Geojit Investments, attributed the selloff to macroeconomic triggers and structural concerns. "Today's decline in Indian IT stocks was driven by stronger-than-expected US employment data, with a marginal decline in the unemployment rate, which has reduced expectations of an early rate cut by the Fed. This pressure was further compounded by ongoing concerns around AI-led disruption in the sector," noted Vinod Nair, Head of Research at Geojit Investments.
"AI is creating a structural shift in Indian IT services by reducing timelines and automating tasks, putting pressure on the traditional headcount-based outsourcing model. Layoffs are likely in routine-heavy areas as fewer people will be needed to deliver the same outcomes. Even ERP implementation, as highlighted by Palantir’s recent focus, is now vulnerable to AI disruption. Clients are shifting toward outcome-based pricing. In the coming quarters, AI adoption could create headwinds for deal wins, potentially impacting topline, making close monitoring of deal flow essential to assess its real impact," he also said.
Technology stocks came under intense selling pressure on Thursday, dragging the Nifty IT sub-index down 5.51 per cent amid concerns over rising disruption from artificial intelligence (AI) and fading hopes of a near-term rate cut by the US Federal Reserve.
Market expert Avinash Gorakshakar said the sector is entering a more competitive phase where scale and capability will determine survival. "For the IT sector, one needs to understand that it is exactly like the survival of the fittest. Larger players are more likely to survive in the AI era, while the smaller ones may find it a little tougher," market expert Avinash Gorakshakar told Business Today.
"There will be a lot of upskilling required for employees, especially at the entry level. Those in the higher-end category may not be impacted as much. Indian companies, by nature, are quite competitive on costs. So, it is unlikely that there will be mass layoffs across many companies. We continue to remain positive on larger companies like TCS, Infosys, HCL Technologies and Persistent Systems. These companies have very strong domain knowledge across the entire business chain, which is highly competitive. However, one should also understand that such events create a level of panic and uncertainty for some time," he added.
"My view is that Indian IT companies are quite strong. Of course, those who want to invest now should take a long-term view (12–18 months) if they are looking for better risk-reward. In the short term, volatility will continue because there is a lot of noise in the market, which creates uncertainty. But fundamentally, these companies appear to be quite solid," Gorakshakar stated.
Vinod Nair, Head of Research at Geojit Investments, attributed the selloff to macroeconomic triggers and structural concerns. "Today's decline in Indian IT stocks was driven by stronger-than-expected US employment data, with a marginal decline in the unemployment rate, which has reduced expectations of an early rate cut by the Fed. This pressure was further compounded by ongoing concerns around AI-led disruption in the sector," noted Vinod Nair, Head of Research at Geojit Investments.
"AI is creating a structural shift in Indian IT services by reducing timelines and automating tasks, putting pressure on the traditional headcount-based outsourcing model. Layoffs are likely in routine-heavy areas as fewer people will be needed to deliver the same outcomes. Even ERP implementation, as highlighted by Palantir’s recent focus, is now vulnerable to AI disruption. Clients are shifting toward outcome-based pricing. In the coming quarters, AI adoption could create headwinds for deal wins, potentially impacting topline, making close monitoring of deal flow essential to assess its real impact," he also said.