Indian IT Sector Plunges to Multi-Year Lows Amid Global Slowdown, AI Disruption

The Indian IT sector is reeling, with the Nifty IT index plummeting to multi-year lows and major players like HCLTech, Infosys, and TCS deep in the red. The immediate catalyst for this sharp downturn on July 1, 2026, was KPIT Technologies, whose shares crashed over 16% after the company warned of a significant revenue slowdown in Q1FY27 due to unexpected project delays and spending cuts from key European automotive OEMs like BMW and Volkswagen. This isn't just a blip; the Nifty IT index has fallen roughly 29-31% year-to-date in 2026, marking its worst performance in 18 years, a slide compounded by the growing impact of artificial intelligence and cautious global enterprise IT spending. Analysts point to 'AI deflation,' where AI-led productivity gains reduce the need for traditional IT services, challenging the long-standing business model of Indian firms. The combined weight of top IT companies in the Nifty 50 has also shrunk to its lowest in over two decades, signaling a broader market re-rating amidst these structural shifts. Looking ahead, brokerages like JPMorgan have downgraded outlooks, predicting prolonged sluggish growth for the sector, with revenue growth potentially stuck at 3-4% for the foreseeable future. While the short-term outlook remains challenging, with companies struggling to optimize costs as revenue slows and even cutting jobs, the industry also anticipates a massive long-term opportunity from AI-led services, potentially creating an incremental $300-400 billion market by 2030. Investors will be watching closely for how these firms adapt their strategies to capitalize on this AI boom while navigating immediate headwinds.