Indian IT stocks hit near 10-month low on AI disruption fears, fading Fed rate cut hopes

Updates share levels throughout, stock milestone in headline and paragraph 1, analyst comment in paragraphs 6-7

By Nandan Mandayam

Feb 12 (Reuters) - Shares of Indian software exporters slid over 5% on Thursday, pushing the Nifty IT index to a near 10-month low, as persistent fears of AI-led disruption and fading hopes of a near-term Federal Reserve rate cut weighed on sentiment.

The 10-member .NIFTYIT index was the worst-performing sector on the day and remains the weakest so far this year, after sliding 12.6% in 2025 and a further 12.2% in 2026.

Tata Consultancy Services TCS.NS, Infosys INFY.NS and HCLTech HCLT.NS fell 5.5%, 5.7%, and 4.1%, respectively, on the day.

The launch of Amazon AMZN.O and Google GOOGL.O-backed Anthropic's Claude Cowork AI tool to automate tasks, pressured tech stocks globally last week and stoked concerns over demand for labour-intensive Indian IT services.

Domestic IT stocks have shed 14% since February 4 when the selloff began, resulting in TCS - previously India's fourth-most valuable stock - sliding to sixth place.

"The sell-off we have seen in IT stocks due to the AI models that have been launched in recent weeks is overdone," said Systematix Group analyst Ambrish Shah.

"The models currently still require human intervention and regulated verticals such as banking, financial services, and insurance are likely to be more insulated from the AI disruption."

Indian tech stocks have been battered the most, while peers in Asia, Europe and North America have recovered slightly.

Adding to the pressure on Indian IT stocks, hopes of a Fed rate cut faded after U.S. job growth unexpectedly accelerated in January and the unemployment rate fell, bolstering bets that interest rates may stay higher for longer.

That weighed on IT shares, which derive a significant portion of revenue from the United States. Lower U.S. rates could lift demand for IT spending that has largely been muted for the last few years.

The slump in IT stocks also dragged India's benchmarks lower on Thursday, with the Nifty 50 .NSEI down 0.44% and BSE Sensex .BSESN down 0.5%.

(Reporting by Nandan Mandayam in Bengaluru; Editing by Sonia Cheema and Nivedita Bhattacharjee)

((Nandan.Mandayam@thomsonreuters.com; Mobile: +91 9591011727;))