- Infosys lost over ₹1.34 lakh crore in market value in February – its steepest decline since 2013.
- Domestic mutual funds face a notional ₹41,892 crore loss; FIIs have trimmed holdings to a four‑year low.
- AI breakthroughs from startups like Anthropic are rattling confidence in India’s $300 billion IT services model.
- Comparable sell‑offs in 2013 showed that panic can be short‑lived, but only for the right strategies.
- Our playbook outlines clear entry and exit triggers for both bullish and bearish outlooks.
You missed the AI warning sign – now the market is punishing Infosys.
Why Infosys' February Slide Echoes a Decade‑Old Bear Market
Infosys’ shares fell 20.34% in February, sliding to ₹1,308 from a 52‑week high of ₹1,775. The loss erased ₹1,33,824 crore from its market cap, taking the valuation from a peak of ₹8.37 lakh crore down to roughly ₹6.99 lakh crore. This is the worst monthly performance since April 2013, when the stock plunged 22.75% amid a global tech correction. The pattern is familiar: a sharp, sentiment‑driven sell‑off followed by a period of volatility that rewards disciplined investors.
AI Disruption: The Real Threat to India's $300 Billion IT Services Industry
Artificial‑intelligence tools are moving from research labs to production environments at break‑neck speed. Start‑ups such as Anthropic released “Claude Co‑Work Agent,” a generative‑AI assistant that can automate code reviews, write documentation, and even prototype applications. For a labour‑intensive sector where 40‑70% of revenue stems from application services, the prospect of automation eroding billable hours is unsettling.
Brokerage houses warn that if AI chips away at application‑services margins, earnings growth could decelerate sharply. The Nifty IT index, a proxy for the sector, fell 19.13% in February and briefly touched a 21.45% low – the deepest decline since November 2023. The sell‑off is not limited to Infosys; peers such as TCS, Wipro, and HCLTech have all seen double‑digit drops, underscoring a sector‑wide anxiety.
How Peer IT Giants Like Tata Consultancy and Wipro Are Reacting
Tata Consultancy Services (TCS) announced a $2 billion AI‑upskilling fund in January, aiming to reskill 30% of its workforce by 2027. The move is a defensive hedge, signalling to investors that the company is proactively mitigating AI‑related revenue risk.
Wipro, meanwhile, has accelerated its partnership with Microsoft Azure OpenAI Service, integrating generative‑AI into its consulting pipelines. The strategy is to shift the revenue mix toward higher‑margin AI‑enabled solutions, potentially cushioning the impact on traditional application services.
Both firms have seen their share price recoveries outpace Infosys’s recent slump, suggesting that clear AI‑playbooks can restore investor confidence even amid sector turbulence.
Historical Parallel: 2013 IT Sell‑off and What It Taught Investors
In April 2013, the Indian IT sector faced a sudden pull‑back triggered by concerns over a slowdown in US enterprise spending. Infosys, TCS, and Wipro all posted double‑digit monthly declines. However, the sell‑off was short‑lived; by the end of 2013, the sector had reclaimed most of its lost ground, driven by renewed demand for digital transformation projects.
The key lesson was patience combined with selective exposure. Investors who trimmed exposure only to re‑enter at lower valuations captured 30‑40% upside over the subsequent 12‑month period. This historical precedent suggests that a disciplined, value‑oriented approach can turn a crisis into an opportunity.
Technical Snapshot: What the 20% Drop Means for Valuation
Before February, Infosys traded at a forward P/E of roughly 23x, slightly above its 5‑year average. After the 20% decline, the forward P/E compresses to around 19x, aligning with sector peers. The price‑to‑book ratio fell from 12.5x to 10.4x, offering a more attractive entry point for value investors.
On the chart, the 50‑day moving average (MA) is now acting as a dynamic support level at ₹1,250. A break below this MA with volume exceeding the 10‑day average could signal a deeper correction, while a bounce with bullish candle patterns (e.g., hammer or bullish engulfing) may indicate the start of a bottom‑fishing rally.
Investor Playbook: Bull vs. Bear Cases for Infosys
Bull Case: If AI‑related initiatives (upskilling funds, strategic partnerships) translate into higher‑margin contracts, earnings could accelerate 12‑15% YoY by FY27. The valuation gap to peers narrows, and the stock could rally 25‑35% from current levels, reclaiming the lost ₹41,892 crore of mutual‑fund capital.
Bear Case: Should AI automation erode application‑services revenue faster than anticipated, margin compression could push forward EPS growth below 5%. Continued foreign‑institution outflows may drive the Nifty IT index below ₹20,000, dragging Infosys to sub‑₹1,150 levels – a 30% downside from today.
Key triggers to watch:
- Quarterly earnings beat on AI‑derived revenue – bullish.
- Miss on margin guidance or a downgrade from a major broker – bearish.
- Foreign Institutional Investors (FIIs) net buying of >₹2,000 crore in the IT bucket – bullish.
- Net FII outflow of >₹5,000 crore over two weeks – bearish.
Position sizing should reflect risk tolerance: a 5‑10% portfolio allocation for bullish bets, with a stop‑loss around the 50‑day MA, and a modest 3‑5% defensive exposure for the bear scenario.