Indian equity markets witnessed a sharp decline on February 12, 2026, as investors dumped information technology stocks amid rising concerns about artificial intelligence disruption and tightening global liquidity conditions. The selloff in frontline IT counters pulled benchmark indices lower and triggered broad weakness across sectors.
The BSE Sensex dropped over 550 points during the session, while the NSE Nifty 50 slipped below the 25,850 mark. Traders reacted aggressively to fresh global cues, renewed fears about US interest rate trajectories, and mounting anxiety over the long-term impact of artificial intelligence on traditional outsourcing models.
IT Stocks Lead the Decline
Technology majors bore the brunt of the selling pressure. Heavyweights such as Tata Consultancy Services, Infosys, and Tech Mahindra saw sharp intraday declines as institutional investors reduced exposure to the sector.
Market participants cited two primary concerns. First, investors fear that rapid advancements in generative AI platforms could compress margins for companies that rely heavily on large-scale coding, testing, and maintenance contracts. Second, global clients continue to delay discretionary tech spending amid macroeconomic uncertainty.
Large-cap IT stocks hit multi-month lows, and the Nifty IT index extended its losing streak. Traders pointed to heavy volumes, which signaled strong conviction selling rather than routine profit booking.
Artificial Intelligence Anxiety Intensifies
Investors increasingly question how traditional IT services firms will adapt to a fast-changing technological landscape. Generative AI tools now automate tasks that once required sizable human teams. Companies across the globe experiment with AI-driven development platforms to reduce costs and increase productivity.
Indian IT giants built their growth models around scale, workforce expansion, and global delivery centers. Investors now assess whether these companies can pivot quickly toward high-value AI integration services rather than lose revenue from automation-led efficiency gains among clients.
Brokerage firms flagged margin pressure as a key risk. If clients demand lower billing rates due to AI-enabled productivity improvements, IT firms may struggle to protect operating margins without aggressive reskilling and strategic repositioning.
Global Rate Concerns Add Pressure
Global macroeconomic signals compounded the stress in domestic markets. Investors closely tracked commentary from US Federal Reserve officials regarding inflation trends and interest rate outlook. Persistent inflation in major economies could delay anticipated rate cuts, thereby strengthening the US dollar and tightening global financial conditions.
Indian equities often react sharply to shifts in global liquidity. Higher US yields tend to attract capital flows back to developed markets, which reduces foreign institutional investment inflows into emerging markets like India.
Foreign portfolio investors reportedly trimmed positions in Indian equities during recent sessions. Technology stocks, which command premium valuations, often face the first wave of selling when global risk appetite weakens.
Broader Market Weakness
Although IT stocks led the decline, weakness spread across several other sectors. Financials, auto, and select consumer counters also witnessed selling as traders chose caution over aggressive positioning.
Market breadth reflected the cautious mood. A higher number of stocks closed in the red compared to gainers. Mid-cap and small-cap indices also registered losses, though they showed relatively better resilience compared to frontline technology stocks.
Traders observed heightened volatility throughout the session. Early attempts at recovery failed as sellers re-entered at higher levels. Intraday charts displayed strong resistance zones, which limited upside attempts.
Domestic Fundamentals Remain Intact
Despite the day’s sharp correction, analysts continue to emphasize the strength of India’s domestic economic fundamentals. Strong tax collections, steady infrastructure spending, and healthy banking system balance sheets support the long-term growth narrative.
Domestic institutional investors provided some cushion by absorbing part of the foreign selling. Systematic investment plan flows into mutual funds remain robust, which reinforces structural demand for equities.
Corporate earnings outside the IT sector have largely met expectations this quarter. Banks, capital goods companies, and select manufacturing firms reported stable performance, which prevented a deeper market slide.
Valuation Reset in Progress
Many market strategists interpret the correction as a healthy valuation reset rather than the start of a prolonged downturn. Technology stocks rallied strongly over previous quarters on expectations of global recovery and digital transformation acceleration. Elevated price-to-earnings multiples left limited room for disappointment.
The current selloff may align valuations more closely with near-term growth realities. Long-term investors often view such corrections as opportunities to accumulate quality stocks at improved entry points.
However, experts advise selective stock picking rather than blanket buying. Companies that demonstrate clear AI integration strategies, diversified revenue streams, and strong client relationships may outperform peers during this transition phase.
Investor Sentiment Turns Defensive
Short-term traders adopted a defensive stance. Many shifted allocations toward defensive sectors such as pharmaceuticals and utilities, which typically show resilience during risk-off phases.
Derivatives data indicated rising put activity around key Nifty support levels, suggesting traders sought downside protection. Volatility indices ticked higher, reflecting increased uncertainty.
Market participants now watch upcoming global economic data releases and corporate commentary for direction. Any signs of easing inflation or clarity on AI monetization strategies could stabilize sentiment.
What Lies Ahead
The trajectory of Indian equities will likely depend on three key factors in the near term:
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Global Interest Rate Signals: Clear guidance from the US Federal Reserve could restore confidence.
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IT Sector Commentary: Management updates regarding AI adoption strategies and deal pipelines may shape investor expectations.
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FII Flow Trends: Sustained foreign inflows could help benchmarks regain upward momentum.
While the February 12 session highlighted vulnerability within the technology space, it also underscored the market’s sensitivity to structural technological shifts. Investors now demand clear execution roadmaps from IT leaders.
Indian markets continue to operate within a broader growth framework supported by domestic demand and structural reforms. However, the evolving AI landscape introduces a new competitive dynamic that requires strategic adaptation.
The sharp IT-led selloff serves as a reminder that markets constantly recalibrate expectations. As companies navigate technological transformation, investors will closely evaluate resilience, innovation capability, and margin sustainability.
For now, caution dominates trading floors, but long-term conviction in India’s growth story remains intact.
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