Indian IT stocks crashed on Friday as growing disruption fears from artificial intelligence weighed on major stocks such as Tata Consultancy Services (TCS), Infosys, Tech Mahindra, HCLTech. The trigger came from global technology giant Accenture’s weaker-than-expected outlook, which rattled investor sentiment and erased nearly Rs 1.35 lakh crore in market value in a single trading session from major IT stocks.Infosys led the decline with a drop of more than 8%. Other major names, including Mphasis, TCS, Tech Mahindra, LTIMindtree, HCLTech and Persistent Systems, registered losses of around 5-6%.The rout dragged the combined market capitalization of Nifty IT companies down to Rs 21.57 lakh crore, while the Nifty IT index plunged 6%. The latest sell-off has further deepened the sector’s troubles, taking the Nifty IT index’s decline for calendar year 2026 to 29%. Investors are increasingly concerned that advances in generative AI could reduce the long-term dependence on conventional IT services, creating structural challenges for the industry.
What was the Accenture outlook that rattled IT stocks?
Although Accenture reported revenue of $18.7 billion for the quarter, the underlying performance raised concerns. Accenture shares crashed 18% after the company announced its third-quarter results.Accenture lowered the upper end of its FY26 revenue growth forecast by 100 basis points, revising the range to 3-4% from the earlier 3-5%. After accounting for factors such as DOGE-related impacts and inorganic contributions, the updated guidance points to fourth-quarter growth of between -1.0% and +3.0% year-on-year in constant currency terms.This has challenged market expectations that India’s six largest IT companies would see an acceleration in growth during the period.
More pressure on IT valuations?
According to an ET report, Jefferies analyst Akshat Agarwal adopted a cautious stance, warning that Accenture’s lower revenue growth outlook points to additional moderation in business momentum over the coming quarters. He said that the revised guidance could lead to further downgrades to earnings expectations for Indian IT companies. It would also intensify concerns around their long-term growth prospects and valuation multiples. The brokerage has highlighted three key implications for Indian IT firms. First, the softer guidance indicates that growth could weaken more, which could potentially lead analysts to trim their estimates. Second, sluggish expansion despite a low base may fuel worries about the sector’s future trajectory and trigger additional valuation compression. Third, companies may need to seek alternative growth avenues, including mid-sized deals and acquisitions, to compensate for weakness in traditional service lines. Jefferies also pointed out that even after Accenture’s 18% decline, the top five Indian IT companies continue to trade at a roughly 70% premium to the global technology consulting giant, leaving room for further downside in valuations.Nomura, meanwhile, said the conflict in the Middle East is likely to affect both revenue growth and deal activity during the first quarter of FY27. While Nomura expects near-term revenue growth for Indian IT services firms to remain under pressure because of the Middle East situation, it believes AI-led projects will continue to scale as enterprises shift from pilot programmes to real-world implementations. Motilal Oswal described the implications of Accenture’s results for Indian IT companies as negative. The brokerage highlighted that outsourcing bookings declined 14.7% year-on-year, following a sharp slowdown in the previous quarter as well. Motilal Oswal expects most Indian large-cap IT companies to report similarly subdued performance in the first quarter of FY27.(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.)
