AI Shockwaves: Nifty IT Index Plummets 20% in February; LIC Loses ₹42,500 Crore

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• February 26, 2026
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Mumbai | February 26, 2026 – The Indian IT sector is grappling with a historic downturn, as the Nifty IT Index recorded a staggering 21% decline in February 2026, marking its worst monthly performance since the 2008 global financial crisis. The sell-off, which saw the index crash by 5% in a single day on February 24, has been fueled by a “regime shift” in investor sentiment regarding the viability of the traditional IT services model in an AI-dominated era.

The “Claude Code” Crisis: Anthropic vs. Legacy IT

The primary catalyst for the recent bloodbath was an announcement from US-based AI startup Anthropic. The firm unveiled a new tool called Claude Code, specifically designed to automate the modernization of COBOL—a 67-year-old programming language that still underpins 95% of ATM transactions and critical banking systems globally.

For decades, upgrading these legacy systems was the “bread and butter” of IT giants like IBM, TCS, and Infosys, requiring massive teams of consultants and years of manual work. Anthropic’s claim that AI can now complete these migrations in quarters rather than years has sent shockwaves through the industry.

• IBM’s Historic Plunge: Shares of IBM fell by 13% in a single session—its steepest one-day drop since the year 2000—wiping out over $31 billion in market value.
• The “Billable Hours” Threat: Analysts at HSBC and Jefferies warned that if AI can automate 25-30% of traditional coding and maintenance, the industry’s labor-arbitrage model could face “structural deflation.”

Carnage on Dalal Street

The panic in New York spilled over immediately to Indian markets. Large-cap IT stocks, which derive the majority of their revenue from North America and Europe, bore the brunt of the institutional exit:

“This is not just a market dip; it is a valuation regime reset,” noted one market analyst. “For the first time in 20 years, the moat of labor-based outsourcing is under direct technological attack.”

LIC and Institutional Impact

The ripple effect has severely impacted India’s largest institutional investor, the Life Insurance Corporation (LIC). With roughly 12.4% of its equity portfolio allocated to IT, LIC has reportedly lost ₹42,500 crore in market value over the last two months.

More than half of this erosion—approximately ₹26,510 crore—came from its massive holdings in TCS and Infosys. Domestic mutual funds have fared even worse, with estimated paper losses exceeding ₹3.5 lakh crore across the tech sector so far this year.

The Road Ahead: Evolution or Obsolescence?

While the markets are in a state of “AI panic,” some industry leaders remain optimistic. TCS CEO Krithi Krithivasan recently stated that AI will eventually lead to a “massive explosion in the volume of work,” rather than a contraction, as companies tackle more complex problems.

However, for now, investors are moving toward defensive sectors like metals and financials, leaving the Nifty IT index at a two-year low.