Indian IT Stocks Plunge as AI Disruption Fears Spread 

February 05, 2026: Indian equity markets opened lower on February 04, 2026, Wednesday, after sharp declines in US and European technology shares overnight. The Nifty IT index fell 5.87% to 36,345.65 points, while the BSE IT index slipped 5.5% to 35,109.51 points, as technology stocks sold off following the announcement of Anthropic’s new AI tool. 

NSE & BSE Index Performance 

On February 4, the Nifty opened at 38,650 points, hit an intraday high of 38,720, and slipped to a low of 36,290 before closing at 36,345.65. The Sensex also reflected the weakness, declining by over 1,700 points by the close of the session. 

Sectorally, IT stocks underperformed sharply following the announcement, while banking and FMCG sectors remained relatively stable. Market breadth stayed negative on the NSE, with around 1,450 stocks declining compared with about 720 advances. 

Cause Behind the Plunge of the IT Stocks  

The immediate trigger was US-based AI firm Anthropic’s release of a new AI tool for corporate legal teams last week. The tool, part of Anthropic’s AI assistant Claude, is designed to handle routine legal tasks such as contract checks, non-disclosure agreement reviews, standard drafting, and legal summaries. 

Although Anthropic clarified that the tool does not provide legal advice and requires lawyer supervision, investors were concerned that it could reduce demand for traditional legal software and services. This led to sharp sell-offs in European legal tech firms, US technology companies, and Indian IT stocks. 

Foreign institutional investors (FIIs) reportedly reduced exposure to Indian IT firms amid overnight weakness in US markets. The nervousness was amplified by already stretched valuations, cautious global clients, and weak discretionary tech spending in the US and Europe. 

Top Gainers and Losers 

All major IT stocks ended in the red, with Infosys emerging as the top loser, falling 7.4% by 9:30 am IST on Wednesday, February 4, right after the announcement. Tata Consultancy Services declined 7%, while Wipro slipped 5.2% and HCLTech and Tech Mahindra also traded lower, shedding 4.8% and 4.5%, respectively. 

The selling pressure was broad-based, with all 10 constituents of the Nifty IT index trading in the red. Losses across the index ranged between 4% and 7.4%, positioning IT as the worst-performing sector for the session as concerns around AI-led disruption weighed on sentiment. 

In contrast, select pockets of the market showed resilience. Retail and consumer stocks outperformed, with Trent and Eternal gaining around 5% each. The Nifty Energy index advanced for a third consecutive session, led by Adani Power, NLC India, Power Grid, and NTPC.  

Buying interest was also seen in logistics and auto stocks. This was done with Adani Ports and Maruti Suzuki supporting a 1.1% rise in the Nifty Auto index. Infrastructure names linked to AI hardware drew attention, as Kaynes Technology and Netweb Technologies rose 6.45% and 0.76%, respectively, amid a shift towards companies enabling AI-ready infrastructure rather than software services. 

What to Watch Next 

Investors are expected to track upcoming US technology earnings, developments in the global artificial intelligence space, and key domestic macroeconomic cues and the focus will remain on US non-farm payrolls and inflation data due later this week, along with corporate results from leading Indian IT companies scheduled for release next week. 

Market participants will also monitor global AI product announcements for potential implications on outsourcing demand. Attention is likely to remain on how Indian IT firms balance AI adoption with their existing outsourcing-led revenue models, as global clients continue to reassess technology spending priorities. 

Ref: 

• https://www.nseindia.com/index-tracker/NIFTY%20IT 
• https://www.bseindia.com/sensex/code/85