The Indian IT sector is navigating a volatile period as February 2026 marks a significant structural transition. Rapid advancements in autonomous AI tools have triggered a sharp correction, with the Nifty IT index plunging **21%** this month—its steepest monthly decline since the 2008 financial crisis. Investor anxiety has been fueled by new AI models, such as Anthropic’s Claude series, which can automate complex financial research, COBOL modernization, and legal workflows. This has raised concerns about a reduction in billable hours and potential pricing pressure on the traditional labor-intensive model. **Market Performance and Valuations** Despite the monthly rout, the market showed signs of stabilization on February 26, 2026. The Nifty IT index recovered **0.89%** to close at **30,797.05**. Key heavyweights managed modest gains: * **TCS** rose **2.16%** to reach a market cap of approximately **₹9.51 lakh crore**. * **Infosys** maintained its position with a valuation near **₹6.7 lakh crore**. * **HCL Technologies** climbed **2.91%**, supported by a strong AI engineering pipeline. While the combined market value of India's top five IT firms now stands at roughly **$240 billion**, they are facing stiff valuation competition from AI-native startups. **Strategic Adaptation and Outlook** Industry leaders are pushing back against "AI doomsday" narratives. Anand Mahindra has characterized the current shift as a "digital tsunami" where human-centric skills like empathy, intuition, and complex problem-solving become premium assets. He emphasizes that AI should be viewed as an accelerator rather than a threat. Tech firms are already pivoting: * **AI Deal Flow**: Approximately **74%** of new contracts now center on Generative AI and automation. * **Revenue Growth**: The sector is projected to grow **6.1%** in FY26, reaching a total of **$315 billion**. * **Employment**: Despite automation, the industry remains a net hirer, adding **1.35 lakh** jobs in 2026, though roles are shifting toward specialized AI governance and domain-specific engineering. The focus is moving from volume-based tasks to high-value, outcome-oriented delivery. While traditional application services revenue faces compression, new opportunities in cybersecurity, cloud infrastructure, and AI integration are expected to drive a recovery in FY27.