The Indian Information Technology sector is currently navigating a period of significant structural adjustment. As of late February 2026, the Nifty IT index reflects this volatility, trading near the **32,004** level. This represents a decline of approximately **0.98%** in recent sessions and a more substantial correction of nearly **21%** over the past year. Market valuations have retreated from previous peaks, with the sectoral Price-to-Earnings (P/E) ratio now hovering around **22.74**. While these levels appear more attractive compared to the historical highs of the post-pandemic era, institutional experts suggest caution. S Naren of ICICI Prudential AMC notes that low multiples alone do not provide a sufficient safety net in a disrupting landscape. The primary source of uncertainty is the accelerating impact of Artificial Intelligence. Industry leaders have highlighted a massive shift in the global workforce, projecting that while AI could put **90 million** traditional tech roles at risk, it may simultaneously create **170 million** new opportunities. This "root-and-branch" transformation is forcing companies to pivot from routine development and testing toward high-skill AI engineering and agentic workflow design. Quarterly earnings for the period ending December 2025 further underscore the sector's current strain. Major players like Infosys reported a **2.2%** year-on-year decline in net profit to **6,654 crore**, while LTIMindtree saw a sharp **30.7%** profit drop to **971 crore**. These figures highlight the immediate pressure from rising operational costs and one-time regulatory expenses, even as deal pipelines remain active. Investor sentiment remains tethered to long-term growth clarity. While a correction in global AI-linked stocks could trigger a relative outperformance for Indian equities, the sector's upside depends on whether AI enhances or impairs the traditional services model. Currently, Tier 2 companies are showing more agility, often outperforming Tier 1 giants in revenue growth during this transition. For the sector to regain decisive momentum, it must move beyond mere cost-optimization. High dividend yields and lower entry prices are providing some downside protection, but the market is still waiting for proof that Indian IT can successfully monetize the AI transition without permanent impairment to industry margins. This video analyzes the recent sell-off in major IT stocks and evaluates whether current valuations represent a value trap or a long-term buying opportunity.