AI Fears Hit IT Shares, Keep Benchmarks Rangebound

Indian equity benchmarks ended almost unchanged on Wednesday, 4 February 2026 . They snapped a two-day rise, as a sharp sell-off in information technology stocks erased gains made in other sectors. The Sensex added just 78.56 points to close at 83,817.69, while the Nifty 50 settled 48.45 points higher at 25,776.

The mild gains masked heavy churn beneath the surface. Technology shares dragged the market lower after fresh worries over artificial intelligence hit global software stocks, spilling into Indian IT counters during the session.

IT Stocks Sink On AI Fears

The Nifty IT index plunged 6%, making it the worst-performing sector of the day. The fall followed a sharp drop in US-listed software stocks overnight after AI startup Anthropic unveiled a productivity tool aimed at in-house legal teams.

Analysts feel that investors fear rapid advances in AI-led automation could reduce demand for traditional software services. Concerns have also grown around pricing pressure and margins at large IT services firms if clients turn to cheaper AI-driven tools.

Among Sensex constituents, Infosys, Tata Consultancy Services, HCL Technologies, and Tech Mahindra were among the biggest drags. Banking names with exposure to technology-led spending cycles, such as Axis Bank, also featured on the losers’ list.

The IT index’s fall stood out even as most other sectors showed resilience. Traders said the speed of the decline suggested unwinding of recent positions rather than fresh long-term selling.

Defensive And Consumption Themes Offer Support

Gains in power, infrastructure, and consumption-linked stocks helped limit the downside in the benchmarks. Eternal, Trent, NTPC, Power Grid Corporation, and Adani Ports emerged as the top Sensex gainers.

The Nifty Consumer Durables index rose 2.6%. The Nifty Oil and Gas index climbed 2%. Pharma stocks moved lower. The Nifty Pharma index ended down 0.34%. Analysts attributed the decline to stock-specific moves rather than any sector-wide trigger.

In the broader market, mid- and small-cap shares outperformed the benchmarks. The Nifty MidCap index gained 0.63%. The Nifty SmallCap index on the other hand rose 1.27%.

Mixed Global Cues

Asian markets traded with no clear direction throughout the day. Investors remained cautious after US equities ended lower overnight.

The sell-off on Wall Street followed a sharp reassessment of software valuations. This is amid rising competition from AI-native companies. Traders in India tracked the moves closely. This is due to the heavyweight of IT stocks in domestic indices and their dependence on US clients. Currency and bond markets remained stable. This offered little direction to equities during the session.

What It Means For Markets?

The sharp fall in IT stocks highlights growing nervousness around the impact of artificial intelligence on traditional software services. For the sector, the focus is likely to shift on how companies plan to adapt their business models and protect margins.

Sources:

Business Standard

Livemint