Indian markets tumble as IT stocks plunge on AI concerns, strong US data

The Indian stock market closed sharply lower on Friday, February 13, 2026, marking the second consecutive day of heavy selling. The BSE Sensex fell 1,048 points to close at 82,626, while the NSE Nifty50 dropped 336 points to settle at 25,471—both indices down roughly 1.3 percent. The selling was broad but concentrated: twenty-seven of the thirty Sensex constituents finished in red, with losses ranging from 1 to 6 percent across major names like Infosys, TCS, HCL Technologies, Tech Mahindra, and Larsen & Toubro. The broader market followed suit, with the MidCap 100 index closing 1.71 percent lower and the SmallCap 100 down 1.79 percent.

The primary culprit was a rout in information technology stocks, which have become the second-largest profit engine for Indian corporate earnings. Overnight, shares of Infosys and Wipro listed on the New York Stock Exchange fell 9.8 percent and 4.6 percent respectively, following a broader technology selloff on Wall Street. The Nifty IT index, which tracks India's largest software exporters, plunged nearly 5 percent and hit a nine-month low. The immediate trigger was a wave of selling in artificial intelligence-related stocks globally, driven by concerns that AI technology could disrupt existing business models and render current revenue streams obsolete. This anxiety has rippled through markets worldwide, with investors suddenly questioning whether the AI boom of the past year can sustain itself or whether it represents a speculative bubble.

The weakness in US markets compounded the pressure. On Thursday, the S&P 500 fell 1.57 percent, the Nasdaq Composite dropped 2.03 percent, and the Dow Jones Industrial Average slid 1.34 percent—the third consecutive day of declines. More significantly, strong US economic data released this week showed better-than-expected growth and a marginal decline in unemployment, which has effectively killed hopes that the Federal Reserve will cut interest rates anytime soon. A prolonged environment of elevated interest rates is generally hostile to growth-oriented and technology stocks, since higher borrowing costs make it more expensive for companies to finance expansion and discretionary technology investments are often the first to be shelved. For Indian IT companies, which derive a substantial portion of their revenue from US-based clients, any pullback in American corporate technology spending directly threatens their order pipelines and revenue visibility.

Beyond the immediate shock of the AI selloff and rate expectations, analysts point to a deeper structural problem: a severe liquidity crunch in the retail investor segment. Over the past two to three years, a combination of initial public offerings, promoter stake sales, and sustained foreign institutional investor selling have drained significant liquidity from the system. Small- and mid-cap stocks, which had surged in the first nine months of 2024, have since corrected sharply from their September peaks, erasing several trillion rupees in market value. Many retail investors who bought at those highs are now trapped in substantial losses and lack the capital to redeploy into new opportunities, which further constrains buying power when markets need it most.

Metal stocks also suffered, with the Nifty Metal index crashing over 3 percent as commodity prices weakened globally. Spot gold fell more than 3 percent to dip below the psychologically important $5,000 mark, while spot silver dropped roughly 11 percent, pressured by a stronger US dollar. Crude oil prices eased following signals from Russia and the United States that they might collaborate on energy matters. These moves suggest renewed expectations that the dollar could regain strength, which typically weighs on commodity-denominated assets and the companies that produce them.

Analysts are divided on what comes next. Some, like VK Vijayakumar of Geojit Investments, argue that the unwinding of the global AI trade could ultimately benefit India, since Indian markets largely missed out on last year's AI-driven rally and therefore have less to unwind. He cautioned against panic selling in IT stocks at this stage, suggesting investors wait for the dust to settle before making decisions. Others emphasize that the real impact of what some are calling the "Anthropic shock"—a reference to the emergence of new AI competitors—on India's IT sector remains unknown. What is clear is that Indian markets have entered a turbulent phase, and the question now is whether this represents a healthy correction or the beginning of something more sustained.