If you have been tracking the stock market lately, you must have noticed something Nifty IT has fallen nearly 31–32% from its recent high. That is a massive drop! Many investors are panicking and asking: “Should I exit IT stocks? Is this sector finished?”
But wait. Before you make any hasty decision, let us understand what is really happening. Because according to a analysis by global investment bank Jefferies, this crash is not the end. It might actually be a once-in-a-decade entry opportunity if you pick the right stocks.
Let us break it all down in simple language.
Why Is the IT Sector Falling So Badly?
There are two big reasons why Indian IT stocks are under heavy pressure right now.
Reason 1: Revenue Stagnation & Valuation Mismatch
India’s top IT companies are facing a serious revenue growth problem. Companies like TCS and Infosys are showing revenue growth of only 0% to 2%, but their sector PE (Price-to-Earnings ratio) is still around 23.3x.
Think of it this way: the stock market pays a premium (high valuation) for high growth. When growth slows down but valuation stays high, the market corrects it downward. This is called de-rating and Jefferies warns that IT stocks could de-rate by up to 65% from current levels in the worst case.
That would bring the Nifty IT index down to COVID-crash levels of 2020. Scary? Yes. But also important to understand.
Reason 2: The AI & GCC Double Threat
Most people think AI is the only reason IT stocks are falling. But AI is just one part of the problem.
The AI Threat: Recently, Anthropic launched powerful AI coding tools Claude ( that can automate programming, testing, and consulting, the very work Indian IT companies charge clients for. Earlier, this AI disruption was expected to hit by 2030–35. But now, in 2026, it already feels real.
Introducing Claude Code Security, now in limited research preview.
— Claude (@claudeai) February 20, 2026
It scans codebases for vulnerabilities and suggests targeted software patches for human review, allowing teams to find and fix issues that traditional tools often miss.
Learn more: https://t.co/n4SZ9EIklG pic.twitter.com/zw9NjpqFz9
Here is a shocking comparison: Anthropic has only 2,500–4,000 employees but is valued at $380 billion (~₹34.5 lakh crore). India’s Top 10 IT companies combined. with over 1.56 million employees have a similar market cap. This tells you exactly how efficient AI is compared to traditional IT services.
The GCC Threat (Even Bigger!): Global companies like JP Morgan, Uber, Google, Amazon, and Salesforce used to outsource their IT work to Indian companies like TCS, Infosys, and Wipro. Not anymore. These giants are now setting up their own Global Capability Centres (GCCs) in Hyderabad, Bengaluru, and Pune, right next to Indian IT offices, and hiring the same engineers directly!
🚨 Number of Global Capability Centres (GCCs) in India.
— Indian Tech & Infra (@IndianTechGuide) January 27, 2026
Bengaluru: 900+
Delhi NCR: 475+
Hyderabad: 396
Pune: 375
Mumbai: 374
Chennai: 312+
Ahmedabad: 80-100
Coimbatore: 60-80
Kochi: 50-70
Kolkata: 40-60 🙏
India hosts 1,800+ GCCs as of 2025.
Today, India has 1,700+ GCCs representing 1,000+ global brands, with over 1 lakh Indian engineers working inside them. These GCCs create ₹4 lakh crore worth of value every year, value that was previously going to Indian IT companies as outsourcing revenue.
The Infosys-Vishal Sikka Story: A Missed Billion-Dollar Chance
Here is a real story that perfectly explains why Indian IT got left behind.
Years ago, Vishal Sikka became the CEO of Infosys. He was a tech visionary from SAP Labs and immediately started investing in AI, Machine Learning, Cloud, and Automation. He even invested $1 billion from Infosys into OpenAI (yes, the company behind ChatGPT!).
But his vision clashed with Infosys founder Narayan Murthy, who questioned the high salaries and spending. The public spat led Sikka to resign and Infosys withdrew its investment from OpenAI.
The result? That $1 billion investment would be worth ~$50 billion today (~₹5 lakh crore), nearly equal to Infosys’s entire current market cap. Infosys could have doubled its value just by staying invested. Instead, it went back to the old model.
This story shows why traditional Indian IT companies are struggling today.
Is Indian IT Completely Finished? Absolutely NOT!
Here is the truth: not every IT company is stuck in the past. When disruption hits any industry, two types of companies emerge:
- Companies that stay in denial like Nokia did when smartphones arrived. They refuse to change and slowly become irrelevant.
- Companies that adapt fast they treat disruption as an opportunity, pivot quickly, and come out stronger.
Take TCS as an example. In its December 2025 investor presentation, TCS declared its goal to become “the world’s largest AI-led technology services company.” It already has 5,000+ AI engagements across industries and earns $1.5 billion annually from AI services. TCS is actively repositioning itself — and that is a positive signal.
The question is: how do you identify which companies will adapt and which will fail?
Tracking 3 things:
- Is the company taking real actions to adopt AI, or just talking big?
- Is it generating actual revenue from AI services today?
- What are its future revenue projections from new AI-based income sources?
“Hawa mein baatein” (just hot air) is not enough. Real AI revenue is the key metric to watch.
Jefferies’ 3 Mid-Cap IT Stock Picks
While Jefferies has downgraded large-cap IT stocks like Infosys, TCS, HCL Technologies, LTIMindtree, and Hexaware, it remains selectively bullish on 3 mid-cap IT companies it believes can adapt faster.
Mid-size companies have an advantage: they are more agile and can pivot quickly than giant corporations. Jefferies projects these 3 picks will deliver EPS CAGR of 19–25% during 2026–2028, versus only ~6% for large-cap IT.
| Company | 3-Yr Sales CAGR | TTM Profit Growth | Key Highlight |
|---|---|---|---|
| Coforge | 23% | ~58% | Strong AI-led deals pipeline |
| Sagility India | 82% | ~100% | Explosive growth, healthcare IT focus |
| IKS (Inventurus Knowledge Solutions) | 52% | ~65% | Strong EPS growth, healthcare AI niche |
Important Disclaimer: These are purely for educational purposes, based on Jefferies’ analysis. This is NOT a buy/sell recommendation. Always consult a SEBI-registered financial advisor before investing.
The Critical Technical Level: Watch Nifty IT Closely
Technically, Nifty IT is currently sitting at a very critical support zone. This level has acted as both a strong resistance (before breakout) and a support (after breakout) multiple times in the past.
- If Nifty IT holds this support, it could be a potential recovery zone.
- If it breaks below, the next support is approximately 10% lower — which would bring serious additional selling pressure.
This is exactly why it is called a “make-or-break” level right now.
Key Takeaways for Investors
- ✅ The 31–32% fall in Nifty IT has created selective opportunities, but risks remain.
- ✅ Jefferies warns of up to 65% further de-rating for IT companies that fail to adapt.
- ✅ The dual threat of AI disruption + GCC expansion is real and structural not temporary.
- ✅ Mid-cap IT companies (Coforge, Sagility, IKS) that are adapting fast may offer better risk-reward.
- ✅ Large IT names (TCS, Infosys, HCL) face near-term pressure but are not dead. watch their AI revenue closely.
- ✅ The most important metric: How much actual revenue is a company earning from AI services today?
Conclusion : Opportunity Waits for the Prepared
Market crashes are scary. But history shows that the biggest wealth is created by those who stay calm, do their homework, and invest when others panic. The Indian IT sector is going through a massive transformation and those who understand it well will be positioned to benefit.
As always, study before you invest, don’t blindly follow tips, and when in doubt, consult a SEBI-registered financial advisor.
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