Based on market activity around February 4–5, 2026, the IT sector experienced a significant downturn, with the Nifty IT index falling sharply (roughly 6% in a single session) due to a combination of global tech weakness and AI-related anxiety. 

Here is a detailed analysis of the situation:

Key Drivers of the IT Sector Decline (Feb 2026)

• Global Tech Sell-off & AI Fears: The primary catalyst was a sharp overnight drop in US technology stocks, driven by investor fears that rapid AI advancements could disrupt established software and cloud companies, eroding pricing power and long-term, human-intensive, subscription revenues.
• Impact on Indian IT Giants: Major Indian IT firms, including Infosys, Tata Consultancy Services (TCS), Wipro, HCL Tech, and LTIMindtree, witnessed significant selling pressure.
• Weak Client Demand & Revenue Pressures: The sector is grappling with sluggish global tech spending, particularly from the US and Europe (which make up ~70% of revenue). Clients are cautious, reducing discretionary spending, and delaying large projects, leading to muted revenue growth.
• AI Disruption Anxiety: Investors are concerned that Generative AI is changing the pricing and delivery models, reducing the relevance of traditional labor-intensive, outsourcing-based models. While AI is seen as a long-term opportunity, the immediate fear is that it will lead to fewer developers, lower billing rates, and margin pressure.
• Foreign Institutional Investor (FII) Selling: FIIs have been actively selling in the IT sector from early 2025 through early 2026, targeting it due to high valuations and low growth visibility. 

Short-Term Outlook

• Heightened Volatility: The pain in the IT sector is expected to persist for some time as the market navigates the structural transition forced by AI.
• Stock Rotation: Investors have been rotating capital out of high-valuation, slow-growth IT stocks into other sectors.
• Support & Valuation: While some analysts suggest that the worst of the volatility might be over, the sector is likely to remain under pressure until earnings clarity improves and AI becomes a revenue driver rather than just a cost-efficiency threat.