Market Brief: Indian IT Sector & Mutual Fund Impact The Indian IT sector is navigating a significant period of volatility as of **February 2026**. Concerns over **Artificial Intelligence (AI)** disruption and slowing global discretionary spend have triggered a sharp correction in frontline tech stocks. The **Nifty IT Index** has faced intense selling pressure, dropping approximately **16%** over the last month. Year-on-year, the index has declined by more than **21%**, currently trading near its 52-week lows around the **32,000** mark. Key Market Data * **Nifty IT Index:** ~32,004 (down **0.98%** in the latest session) * **Monthly Decline:** **16-17%** * **Annual Decline:** **21.69%** * **Major Stock Hits:** * **TCS:** Down **29%** from 52-week high * **Infosys:** Down **27%** from 52-week high * **Wipro & Oracle:** Crashed over **30%** from recent peaks Mutual Fund Exposure & Investor Sentiment Indian retail investors are feeling the heat as diversified equity funds hold significant exposure to the IT sector. Mutual funds currently have approximately **₹4,00,000 crore** at stake in IT stocks. However, fund managers have started trimming positions. In **January 2026**, mutual funds were net sellers in **9 out of 10** major IT companies. **ICICI Prudential AMC** alone offloaded nearly **₹1,953 crore** in Infosys and **₹783 crore** in TCS during this period. The AI Disruption Factor The "AI Scare" is no longer theoretical. Reports suggest that generative AI and automation are delivering productivity gains of **20% to 40%** in core tasks like coding and testing. This shift is eroding the traditional billable-hours model of Indian IT services. Market experts indicate that global capital is shifting toward AI infrastructure and software platforms, potentially contracting the services share of tech spend by **8 percentage points** through 2026. Portfolio Implications For investors with **SIPs (Systematic Investment Plans)** or lump sum holdings in diversified and large-cap funds, the IT slump is a drag on overall returns. While the broader **Nifty 50** remains relatively resilient with an annual gain of over **11%**, the IT sector's underperformance is creating a stark divergence. The **India AI Impact Summit 2026** held in New Delhi highlighted that companies must now pivot from "outsourcing" to "AI-led transformation" to regain investor confidence. Investors are closely watching the **₹31,400 - ₹32,000** support levels for the Nifty IT index. A breach below these levels could signal further downside for technology-heavy portfolios. This video provides a deep dive into how AI is fundamentally changing the revenue models of major Indian IT firms. [AI Impact on Indian IT Stocks 2026](https://www.youtube.com/watch?v=CkqR0lvOI2M) http://googleusercontent.com/youtube_content/0