Nifty IT Crashes 5.8% as AI Fears Slam TCS and Infosys

India’s IT stocks cratered on Wednesday, June 3, with the Nifty IT index shedding about 5.8% intraday, or 1,815.55 points, to 29,301, as Tata Consultancy Services (TCS), LTIMindtree and Tech Mahindra led a broad retreat. The fall landed one day after the index posted its biggest single-session jump of the year, and traders moved fast to lock in those gains.

The heavier pressure shows over a longer window. Through 2026 the Nifty IT index has dropped roughly 25%, far worse than the Nifty 50, as investors mark down what Indian IT is worth once artificial intelligence (AI) starts automating the managed-services work these firms bill by the hour.

TCS and LTM Anchored a 1,815-Point Fall

The selling hit the heavyweights hardest. TCS, the country’s largest software exporter, dropped 8.2% to ₹2,246 on the National Stock Exchange (NSE, India’s main equities bourse), after touching an intraday low near ₹2,258 and falling close to 8% from Tuesday’s close of ₹2,446.90. LTIMindtree (LTM) fell 7.4% to ₹4,025. Between them, the two did most of the damage to the Nifty IT sectoral benchmark, which had closed the prior session at 31,116.55.

The pain ran down the bench, though not evenly.

Infosys held up best on the day, down just 3.4%, and Tech Mahindra and Persistent have actually gained ground over the past month even after Wednesday’s drop. The year-to-date column tells the longer story. LTIMindtree and TCS sit at the bottom, off 34% and 30% respectively since January, while the index as a whole has given back a quarter of its value.

Why a Rally Day Turned Into a Rout

Tuesday set up the fall. The Nifty IT index had climbed 4.2% in a single session, its biggest one-day advance since May 2025, capping a three-day run of about 7.6% on optimism that AI might help these firms more than it hurts them. Strong results from US cloud-software maker Snowflake fed that mood. When traders woke up to a market still nervous about US-Iran tensions and a fresh jump in Brent crude, the easy call was to sell the bounce.

Foreign money made it worse. Foreign institutional investors (FIIs, overseas funds that trade Indian equities) have been pulling cash out of India all year, and they hold large positions in the very IT names that got hit.

• ₹8,362.92 crore: net selling by foreign investors across Indian exchanges in a single session on Tuesday.
• ₹60,847 crore: net FII outflow in April, on top of roughly ₹1.2 lakh crore in March.
• ₹33,000 crore: the May exit, which kept the selling streak running into June.

Currency is the cross-current here. The rupee has weakened sharply this year and trades near 95 to the US dollar, which usually helps exporters who earn in dollars. That tailwind has not been enough to offset the bigger worry hanging over the sector.

AI Is Eating the Managed-Services Base

The thing spooking investors is not this week’s tape. It is the math of the business model. Indian IT was built on labor arbitrage: hire engineers in India, bill clients abroad for their hours, and grow revenue by adding more people. AI threatens the link between headcount and revenue, and the firms still earn a large slice of their money from the routine, repeatable work that AI automates first.

AI developers such as Anthropic are now building enterprise agents that handle multi-step tasks like processing claims, generating code, and running compliance checks, the same jobs these companies staff with people.

Jefferies Cut Six Targets in April

Brokerage Jefferies put the concern in writing on April 14, downgrading six major Indian IT names at once and slashing target prices by as much as a third. The note argued that AI will automate managed-services tasks worth between 22% and 45% of revenue, pushing companies toward more volatile consulting work and raising execution risk.

AI is set to structurally change the business mix for IT services firms.

That line, from the Jefferies note, captures why the de-rating is sticky. The brokerage said valuations still bake in optimistic growth that does not reflect the disruption ahead.

HSBC Sizes the Revenue Hit

Global bank HSBC has gone a step further, putting a figure on the damage. It estimates AI could drive 14% to 16% gross revenue deflation across the sector as deal values shrink. Against more than $200 billion in annual exports, that is a very large hole. The repricing has already cost the top six Indian IT firms close to ₹7 lakh crore (about $73 billion) in market value this year, with TCS alone shedding roughly ₹2.95 lakh crore.

Coforge and the Mid-Cap Exception

The selloff has not treated every name the same, and neither have the analysts. Jefferies took the knife to TCS hardest, cutting its target price about 33%, while flagging smaller, more nimble firms as better placed to adapt. Here is how the April downgrades landed.

• TCS cut to Underperform from Hold, target lowered to ₹2,350.
• Infosys cut to Hold from Buy, target ₹1,290.
• HCL Technologies cut to Hold from Buy, target ₹1,390.
• LTIMindtree cut to Underperform from Hold, target ₹4,300.
• Mphasis cut to Hold from Buy, target ₹2,450.
• Hexaware cut to Underperform from Hold, target ₹460.

The brokerage’s preferred names sit lower down the size ladder. It favors mid-caps Coforge, Sagility and IKS, arguing they can rebuild their business mix faster than the large incumbents whose revenue is anchored to the work AI targets first. That split, big firms cut hardest, smaller specialists spared, is the shape of a moat under pressure rather than a sector in free fall.

What Still Works for the Sector

The bull case has not vanished, and the firms are moving on it. In February, Infosys announced a collaboration with Anthropic on enterprise AI agents, signed at the India AI Impact Summit in New Delhi, pairing Anthropic’s Claude models with the Infosys Topaz AI platform to serve telecom and other regulated industries. The pitch is that if AI is going to automate the work, the people who know the clients’ systems should be the ones building and running the agents.

The deal pipeline backs that up, with firms signing digital-engineering and AI contracts that point to higher deal volumes over time. A weaker rupee adds a second prop: companies bill clients in dollars and pay most costs in rupees, so the currency’s slide flows straight into margins. The open question is whether new AI revenue and cost savings arrive fast enough to fill the hole that automation opens in the old managed-services base.

The next real read comes in July, when the big firms report fiscal first-quarter results and have to put a number on what AI is doing to their revenue.

Frequently Asked Questions

Why did IT stocks crash on June 3, 2026?

Profit booking drove the drop. The Nifty IT index had jumped 4.2% on Tuesday, its biggest single-day gain of the year, and traders sold into Wednesday’s open. Heavy foreign-investor outflows and caution over US-Iran tensions and higher oil prices added to the 5.8% fall.

How much is the Nifty IT index down in 2026?

The Nifty IT index has lost roughly 25% year-to-date in 2026, far underperforming the Nifty 50, which is down closer to 10% over the same stretch.

Which IT stock has fallen the most this year?

LTIMindtree is the worst large-cap performer, down about 34% in 2026, followed by TCS at around 30% and Infosys at about 24%. Tech Mahindra has held up best among the majors, off roughly 7%.

Why is AI seen as a threat to Indian IT companies?

AI automates the routine, repeatable tasks that make up a big share of revenue, breaking the link between headcount and income that the sector was built on. Jefferies estimates these managed-services tasks account for 22% to 45% of revenue, and HSBC sees 14% to 16% sector-wide revenue deflation as deal sizes shrink.

Which IT stocks does Jefferies prefer right now?

Jefferies favors mid-cap firms Coforge, Sagility and IKS, arguing they can adapt their business models faster than large incumbents. It downgraded TCS, LTIMindtree and Hexaware to Underperform, and Infosys, HCL Technologies and Mphasis to Hold in its April note.

Does a weak rupee help IT companies?

Yes. IT firms earn most revenue in US dollars while paying salaries and costs in rupees, so a weaker rupee, trading near 95 to the dollar, lifts reported revenue and margins. The benefit has been outweighed this year by fears about AI cutting demand.

Disclaimer: This article is for informational purposes only and is not investment advice. Equities, and IT-sector stocks in particular, carry market risk, and prices can move sharply on sentiment, analyst notes and currency swings. Consult a qualified financial advisor before making any investment decision. All prices and figures are accurate as of publication on June 3, 2026.