Market Brief: Structural Rotation and the IT Crisis The Indian IT sector is currently navigating its most severe downturn since the 2008 global financial crisis. As of late February 2026, the Nifty IT index has plummeted over 21% in a single month, erasing approximately 6.4 trillion INR in market capitalization. This aggressive sell-off has pushed the index to a 30-month low, with technical indicators like the RSI hovering in deep oversold territory between 16 and 23. Structural headwinds are the primary driver of this volatility. A recent surge in "agentic AI" and automated coding tools has triggered widespread fears that the traditional labor-arbitrage model is becoming obsolete. Reports of accelerating contract cancellations through 2027 have intensified the "falling knife" scenario for major players. Heavyweights like Infosys and Wipro have lost 20% to 24% of their value year-to-date, while mid-cap leaders like Coforge have seen declines exceeding 25%. Valuation risks remain a critical concern. Analysts warn that the historical 30x P/E multiples are no longer justifiable as marginal costs for AI-driven coding collapse toward the cost of electricity. While some experts predict the Nifty IT index could slide further toward the 26,000 level, the broader market is witnessing a massive "value rotation" away from expensive tech and into domestic cyclical sectors. The PSU banking sector has emerged as the primary beneficiary of this capital shift. The Nifty PSU Bank index hit record highs of 9,665 in February 2026, marking six consecutive months of growth. State-run lenders like SBI and PNB are trading near 52-week highs, supported by historic Q3 profits—with SBI reporting a standalone net profit of 21,028 crore INR—and multi-year low NPA ratios. Metals and energy are also showing significant upside momentum. The Nifty Metal index recently hit a fresh all-time high, recording gains of over 14% in early 2026. This strength is bolstered by global demand for base metals and a robust domestic infrastructure push. Similarly, the Nifty Energy index has advanced by over 2.4% recently, driven by strong performance in oil and power stocks amidst rising geopolitical tensions. The current market environment favors a concentrated approach on value-oriented sectors. While IT faces a fundamental reset of its business model, the "Goldilocks" scenario of strong domestic growth and improving asset quality continues to support the rally in banking, metals, and infrastructure-linked names. Investors are prioritizing clean balance sheets and reasonable valuations over high-growth tech narratives. The recent launch of the [Claude AI Security Tool](https://www.youtube.com/watch?v=AiqXTyoPB8s) has contributed to the heightened uncertainty and volatility currently surrounding the Indian IT sector's earnings outlook. This video provides a professional technical analysis and outlook for 2026, specifically discussing the sectors mentioned in the brief. http://googleusercontent.com/youtube_content/0