Indian shares are underperforming regional and emerging market peers this February, driven by a significant $68.6 billion decline in the market value of information technology stocks. Investors are increasingly worried about the disruptive potential of artificial intelligence.
The Nifty 50 index has seen modest gains, while the Sensex has slightly declined, lagging behind broader Asian and emerging market benchmarks. The 10 constituents of the Nifty IT index have collectively shed $68.6 billion in market capitalization this month, with the index experiencing a 21% drop, its worst monthly performance in nearly 23 years. Individual IT firms have seen declines ranging from 16.8% to 27%.
This selloff stems from growing apprehension that advanced automation tools fueled by AI could compress project timelines and fundamentally alter the business model of India's approximately $300 billion IT services sector. Automation pushes from U.S. firms are heightening concerns over faster project execution, pricing pressures, and reduced billable hours.
Analysts caution that AI could significantly impact application services revenue, a critical component for many Indian IT companies. The broader economic implications, including potential impacts on real estate demand, are also being closely watched. Foreign portfolio investors have intensified selling in the IT sector, pulling out substantial amounts in recent months.