TCS and Infosys Shares Crash 5% as Nifty IT Falls: AI Disruption Fears Wipe ₹1.3 Lakh Crore

India's IT sector witnessed a sharp correction in early February 2026 as the Nifty IT index plunged nearly 5%, wiping out over ₹1.3 lakh crore in market capitalisation in a single session. Heavyweights TCS (Tata Consultancy Services) and Infosys led the fall, with TCS slipping below the ₹10 lakh crore market cap mark.

This was not a routine market dip. It marked a structural re-rating of Indian IT stocks amid rising fears that advanced AI tools could disrupt traditional outsourcing models. The sell-off was triggered by global AI developments, strong US jobs data, and growing concerns about revenue deflation in the IT services sector.

This detailed analysis explains what triggered the fall, how AI is reshaping the Indian IT story, what the latest financials indicate, and what investors should monitor next.

Table of Contents:

1. Market Crash Overview: What Happened to Nifty IT
2. Why TCS and Infosys Shares Fell Sharply
3. The AI Disruption Fear Explained
4. Revenue Deflation Risk in Indian IT
5. TCS vs Infosys: Financial Performance Deep Dive
6. Other IT Stocks Also Under Pressure
7. TCS and Infosys AI Strategy: Can They Adapt?
8. Is the Sell-Off Overdone? The Counter Argument
9. Valuation Reset: Is This a Buying Opportunity?
10. Key Metrics Investors Should Track Now
11. Broader Outlook for Indian IT in 2026
12. Conclusion
13. FAQs

Market Crash Overview: What Happened to Nifty IT

On 12 February 2026, the Nifty IT index fell over 4 to 5%, hitting a four-month low near 33,400 to 33,588 levels. Every constituent stock closed in the red.

Impact Snapshot

This correction reflected not just earnings pressure, but a broader shift in investor sentiment towards IT services companies in the AI era.

To understand how sector-wide selling pressure is being reflected beyond individual stocks, track movements in Nifty IT for index-level performance trends.

Why TCS and Infosys Shares Fell Sharply

The crash was triggered by a combination of global AI developments and macroeconomic signals.

Key Triggers

• Launch of Anthropic's Claude Cowork AI agents

• Strong US January jobs data reducing Fed rate cut expectations

• Sharp fall in global tech stocks such as Adobe, Salesforce, Cognizant and Accenture

• Growing fears of AI replacing entry-level IT services work

Investors began questioning whether Indian IT firms can sustain revenue growth if AI automates core services like coding, compliance, legal document review and ERP migrations.

The AI Disruption Fear Explained: What Is the Real Threat?

The biggest concern is not earnings volatility. It is a structural disruption.

Anthropic's Claude Cowork Plugins

• Automates legal document reviews

• Handles sales analytics

• Performs compliance workflows

• Executes data analysis and testing

These tasks traditionally form the backbone of Indian IT outsourcing.

Palantir's ERP Claim
Palantir claimed its AI can complete SAP migrations in weeks rather than years, reducing billable cycles dramatically.

Sentiment Shift

This shift caused the market to reprice Indian IT stocks.

Revenue Deflation Risk in Indian IT: The Biggest Structural Concern

Indian IT firms operate largely on a time and material billing model.

If AI improves productivity by 50%, clients demand cost reductions.

Risks Explained

• Shrinking billable hours

• Shorter project cycles

• Lower pricing power

• Reduced entry-level hiring

• Top-line revenue compression

This creates a margin catch-22:

• Fewer employees improve margins

• But revenue shrinks due to lower billing

This phenomenon is now being described as Revenue Deflation Risk in IT services.

TCS vs Infosys: Financial Performance Deep Dive

TCS Share Price and Financials

• Share price fell over 5% to ₹2,750 to ₹2,776

• Hit 52-week low

• Q3 FY26 revenue growth at 4.9% YoY

• Profit declined 14% YoY due to labour code impacts

• AI services' annualised revenueis  at $1.8 billion

• 17.3% QoQ growth in AI services

• TCS has cut over 11,000 roles in FY26, signalling automation impact.

To assess how the recent correction has reflected in valuations, check the TCS share price along with updated charts and key valuation ratios.

Infosys Share Price and Financials

• Share Price Fell nearly 5.2% to ₹1,397 to ₹1,399

• Q2 FY26 EPS met expectations at $0.20

• Revenue beat at $5.08 billion

• FY26 growth guidance at 2 to 3%

• 2,500+ GenAI projects underway

• Increased buyback and dividend

However, investors remain concerned about lack of clear AI revenue disclosures.

To assess how investors are responding to Infosys’s growth guidance and AI strategy, check the Infosys share price with updated charts and valuation ratios.

Other IT Stocks Also Under Pressure

Technical analysts noted breakdowns in support levels for Wipro and Tech Mahindra, signalling continued weakness.

TCS and Infosys AI Strategy: Can They Adapt?

TCS Strategy

• Five-pillar AI plan

• Targeting AI-led services leadership

• Strong presence in BFSI and healthcare

• 74% of recent deals AI or digital-focused

• AI embedded in consulting and transformation

Infosys Strategy

• Infosys Topaz AI suite

• Small Language Models for banking, IT operations and cybersecurity

• Agentic AI for autonomous systems

• Focus on productised IP

Both firms are repositioning towards outcome-based models instead of pure manpower billing.

Is the Sell-Off Overdone?

Not all analysts are bearish.

The Anti-AI Argument

• AI tools require enterprise integration

• Indian IT firms implement 80% of Fortune 500 systems

• BFSI clients require compliance and governance frameworks

• Large enterprises cannot blindly adopt black-box AI

• Valuations are now more reasonable compared to the 2025 AI hype peaks

The argument suggests AI is an engine, but Indian IT firms remain the mechanics.

Valuation Reset: Is This a Buying Opportunity?

After the sharp correction, Indian IT stocks are no longer trading at the elevated price-to-earnings multiples seen during the AI optimism phase of late 2025. The recent fall has reset expectations.

What Has Changed?

• Valuations have moderated across large-cap IT

• Growth assumptions are being recalibrated

• Risk premiums for AI disruption are now priced in

For example:

Why Some Investors See Opportunity

• Strong balance sheets and cash generation

• Deep enterprise relationships across BFSI and healthcare

• AI transition already underway

• 74% of recent large deals are linked to digital and AI initiatives

The Key Caveat
Medium-term growth assumptions must be reassessed. The era of linear revenue growth through headcount expansion is likely over. Future valuation upside depends on:

• Revenue per employee expansion

• Monetisation of AI-led services

• Ability to shift from time-based billing to outcome-based pricing

Key Metrics Investors Should Track Now

If you are holding TCS, Infosys or other IT stocks, focus on these metrics:

1. Revenue per Employee
Is revenue rising despite lower headcount?

2. AI Revenue Contribution
Clear disclosure of AI-linked revenue growth.

3. Productised IP
Platforms such as TCS WisdomNext or Infosys Topaz.

4. Client Stickiness
Exposure to BFSI and healthcare sectors.

5. US Rate Outlook
IT demand is closely tied to the US macro environment.

6. Deal Pipeline Quality
Are deals outcome-based or cost-takeout focused?

Broader Outlook for Indian IT in 2026

Indian IT has already faced three years of muted growth. A recovery is expected in 2026 if AI spending accelerates.

However, the golden era of linear growth through mass hiring appears over.

Future winners will:

• Operate lean

• Monetise AI outcomes

• Move beyond time-based billing

• Increase platform-based revenues

Conclusion: A Structural Reset, Not Just a Crash

The February 2026 correction in TCS and Infosys shares represents a structural reset in Indian IT valuations.

Short-term volatility may continue due to AI uncertainty and US macro risks. Long-term investors should reassess exposure but not ignore the sector's strong cash flows, global client relationships, and AI transformation potential.

The Indian IT story is evolving from labour arbitrage to intelligence arbitrage.

FAQs on Indian IT Market Crahs 2026

1. Why did TCS and Infosys shares fall in February 2026?
Shares fell due to fears that AI tools like Anthropic's Claude could automate core IT services, combined with strong US jobs data reducing expectations of rate cuts.

2. How much market value was erased in the Nifty IT crash?
Over ₹1.3 lakh crore was wiped out in a single trading session.

3. What is revenue deflation risk in IT services?
It refers to shrinking billable hours and lower pricing due to AI efficiency, leading to potential revenue compression.

4. Is AI a threat or an opportunity for Indian IT companies?
It is both. AI threatens traditional outsourcing models but offers new revenue streams in integration, governance and AI-led transformation.

5. Should investors buy TCS or Infosys after the crash?
Investors should evaluate AI revenue growth, revenue per employee, deal pipeline strength and valuation comfort before making decisions.

6. What sectors provide safety for IT companies?
BFSI and healthcare clients are slower to adopt pure AI solutions due to regulatory requirements, providing relative stability.