The Indian IT sector is facing one of its toughest phases in over two decades, as investors reevaluate the future of technology services in the age of generative AI.
In February 2026, the Nifty IT index plunged roughly 21%, marking its worst monthly performance since 2003 amid growing concerns that artificial intelligence tools could automate large volumes of software development and enterprise services work. That sell-off has erased an estimated $68.6 billion in market value from some of the country’s biggest technology firms.
Analysts and traders have coined this rout the “Saaspocalypse” — a fear-driven reaction to rapid advancements in AI tools that promise to handle complex tasks traditionally billed by human labor. New AI platforms from major players, including enterprise-oriented releases from companies like Anthropic, have heightened investor anxiety that automation could compress the traditional outsourcing revenue model that India’s IT exports have relied on for decades.
Individual stocks across the sector have been hard hit, with major names such as TCS , Infosys , Wipro , HCL Tech and Tech Mahindra all suffering steep declines over the past month.
Rather than retreat amidst the turmoil, Tata Consultancy Services (TCS) — India’s largest IT services firm — is publicly embracing the disruption.
CEO K. Krithivasan has urged the company’s entire workforce, from junior developers to senior leaders, to "build something with AI, not just talk about it." At the Nasscom Technology and Leadership Forum in Mumbai, he stressed that employees should actively use AI tools to solve real business problems, even if such usage cannibalises revenue or alters traditional billing models.
“We are not afraid this technology will take away our livelihood. We believe it is going to open up more, so you enjoy the benefits the more you do, and not by resisting the change ,” Krithivasan said , underscoring that AI should be seen as a demand accelerator, not a job destroyer.
He highlighted a shift in internal expectations: every employee — including senior executives — must personally build AI solutions rather than merely discussing generative models in theory. This directive aims to ensure that leadership stays closely engaged with practical AI innovation, rather than lagging behind more technically fluent junior teams.
TCS is not alone in its strategic pivot. The company’s new AI data centre business, under the Stargate initiative, has already secured OpenAI as its first customer, beginning with a 100 megawatt capacity footprint that could scale up to 1 gigawatt to support large-scale AI workloads in India.
This partnership aligns with a broader industry trend of inflows and infrastructure commitments from global tech firms and investors. At the recent India AI Summit, major players pledged billions in AI capability and computing capacity — signaling confidence in the long-term opportunity, even as short-term disruption rattles markets.
The sell-off has coincided with talent shifts within the IT sector. While TCS recently reported workforce rationalizations — including cuts of around 12,000 positions, attributed by the company to skill mismatches rather than deliberate AI elimination — the emphasis remains firmly on upskilling and redeployment to AI-centric roles.
Industry leaders argue that while AI will reshape work, it won’t trigger widespread layoffs — AI will expand demand for new kinds of technology services, data products, and integrated solutions. TCS’s playbook now centers on transforming its legacy delivery model into an AI-led services powerhouse, positioning itself for the next era of global tech demand.
For Indian tech startups, this moment offers both caution and opportunity. The turbulence in legacy IT stocks reflects a structural reset, but the pivot to AI represents a massive creation moment for innovation, product-led businesses, and platforms built around AI-native workflows and automation technologies.
As technology adoption accelerates, companies that can harness AI to deliver real productivity outcomes and new value propositions are likely to thrive — even as markets recalibrate their expectations of traditional services firms
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