Market Brief: Indian IT Sector Turbulence The Indian IT sector is navigating its most volatile period in over two decades. The **Nifty IT Index** has plunged **21%** in February 2026, marking its steepest monthly decline since the 2008 global financial crisis. On February 25, the index staged a modest recovery of **1.57%** to close at **30,526.35**, yet analysts maintain a cautious outlook as structural risks intensify. AI Disruption and Market Erosion Investor sentiment shifted sharply following the launch of advanced automation tools by US-based firms like Anthropic. Tools such as **Claude Code**, which can modernize legacy systems like COBOL, have raised fears regarding the future of traditional managed services. This technological shift has contributed to a **$68.6 billion** wipeout in market capitalization for the top 10 IT constituents in February alone. Major industry players are seeing significant valuation adjustments. **Infosys** has declined **21%** year-to-date, while **TCS** and **Wipro** have seen drops of **19%** and **24%**, respectively. Brokerages like Jefferies have responded by cutting price targets by as much as **33%**, citing a necessary pivot from labor-intensive models to AI-driven consulting. Divergent Growth and Employment While the broader sector faces pressure, **Nasscom** projects total technology revenue to reach **$315 billion** in FY26. However, growth has slowed to a modest **6.1%**. A significant trend is the plateauing of employment; the industry added only **135,000** net jobs this year, signaling a decoupling of revenue growth from headcount as AI-driven efficiency gains take hold. Currently, AI-related revenues account for approximately **$10–12 billion** of the total pie. Major firms are reporting varying degrees of AI integration, with **TCS** leading at an annualized run rate of **$1.8 billion**, followed by **Infosys** at **5.5%** of its total revenue. Technical and Derivative Outlook The technical structure for the sector remains bearish. Analysts have identified a **"Death Cross"** on weekly charts—a negative crossover of key moving averages—indicating that the previous "buy on dips" strategy has transitioned to "sell on rise." Immediate support for the Nifty IT is pegged near **29,960**, with a deeper floor at **28,800**. Derivative data shows significant call writing at the **25,800** and **26,000** strikes for the Nifty 50, suggesting a ceiling for any near-term relief rallies. Short covering was the primary driver for Wednesday's bounce, but a sustained reversal is unlikely without a stabilization of the Nasdaq and clearer long-term growth visibility.