- Indian indices slipped 1.5%‑1.8% as AI‑driven risk aversion tightened.
- IT and tech stocks led losses, down 14‑18% in February.
- Precious metals and oil‑related stocks outperformed, buoyed by geopolitical tension.
- FPI inflows returned ₹22,600 cr in February, but remain tactical.
- Mid‑cap turmoil highlighted by IDFC First Bank fraud; Tejas Networks surged 33% on a 5G tie‑up.
- Analysts warn a sustained Nifty break above 25,700 is needed to flip sentiment.
You missed the warning signs in India’s market dip, and your portfolio may be paying the price.
Why the Nifty 50’s 1.5% Decline Mirrors Global Tech Turbulence
The Nifty 50 closed the week at 25,178.65, a 1.5% slide that mirrored a broader sell‑off in technology equities worldwide. Nvidia’s earnings miss and Block’s announcement of roughly 4,000 layoffs rattled risk‑on investors, prompting a flight to safety. In India, the ripple effect was immediate: IT and technology stocks, which traditionally act as the market’s growth engine, fell 14‑18% in February, turning the sector into the week’s worst performer.
Impact of AI Sentiment on Indian IT and Technology Stocks
Artificial intelligence is the new frontier, but the market’s perception of AI this week was overwhelmingly negative. Traders treated every AI‑related headline as a binary catalyst, inflating volatility. The result: a sharp contraction in demand for high‑growth tech stocks as investors questioned the speed of commercialisation and regulatory exposure. For the average investor, the lesson is simple—AI hype can quickly turn into an AI‑induced risk‑off, especially when global tech earnings disappoint.
FPI Inflows: Temporary Relief or Structural Shift?
Foreign Portfolio Investors pumped a net ₹22,615 crore into Indian equities in February after three months of net selling. While the cash infusion lifted the Nifty temporarily, seasoned analysts caution that the flow is tactical, not structural. A true shift would require consistent earnings beats across the board and a more resilient macro narrative. Until then, FPIs may swing back at the first hint of renewed global risk, keeping Indian markets on a tight‑rope.
Mid‑Cap Turbulence: IDFC First Bank Fraud and Its Ripple Effect
The mid‑cap universe was shaken when IDFC First Bank disclosed a ₹590 crore fraud at its Chandigarh branch. The stock plunged 20% on Monday, hitting its lower circuit and shedding roughly 13% for the week. The incident amplified existing aversion to Smids, a segment already lagging due to valuation concerns. However, analysts point out that fundamentally sound mid‑caps will still attract selective capital—provided they can demonstrate robust governance and earnings visibility.
Tejas Networks’ 5G Breakthrough: A Rare Bright Spot
Amid the gloom, Tejas Networks delivered a surprise rally, climbing over 33% after sealing a strategic agreement with Japan’s NEC Corp. to produce 5G Massive MIMO radios. Massive MIMO (Multiple‑Input Multiple‑Output) technology is a cornerstone of next‑generation wireless, allowing operators to boost capacity and spectral efficiency. The deal not only validates Tejas’s product roadmap but also positions the company as a credible supplier in a high‑growth niche, offering a contrarian buying opportunity for investors seeking exposure to India’s telecom equipment space.
Why Valuations Look Healthier After Recent Corrections
Indian equities entered 2026 with forward price‑to‑earnings (P/E) multiples compressed from 23‑25x to roughly 19‑22x. A lower forward P/E indicates that the market is pricing in slower earnings growth, but it also creates a valuation buffer that can attract value‑oriented capital. Compared with regional peers, India’s multiples remain attractive, especially given the country’s strong domestic consumption outlook and policy continuity.
Investor Playbook: Bull vs. Bear Cases for the Coming Quarter
Bull Case: A decisive break above the 25,700 Nifty level, supported by a second wave of FPI inflows and a rebound in IT earnings, could trigger a short‑term rally. In that scenario, selective bets on 5G enablers (Tejas Networks), undervalued Smids with solid balance sheets, and commodity‑linked stocks (gold, oil & gas) would outperform.
Bear Case: Persistent global risk aversion, further AI‑related sell‑offs, and continued FPI outflows would keep the Nifty under pressure. The worst‑hit sectors—IT, tech, and realty—would likely stay depressed, while only defensive assets such as precious metals and high‑yielding energy stocks would offer protection.
Bottom line: Until the Nifty consistently trades above 25,700, the market narrative stays bearish. Smart investors should calibrate exposure, favouring quality over hype, and keep a close eye on earnings quality, governance flags in Smids, and any new geopolitical sparks that could swing safe‑haven flows.