The rout across the tech sector continues. In just two days the Nifty IT Index has plunged close to 10%. For 2026 so far, the Nifty IT Index has cracked over 15%. Be it large caps names like Infosys, Wipro or midcaps like Persistent, it is a sea of deep red. What should investors do in the current scenario? Should they exit or continue holding for the longer term?
Should investors exit IT stocks or continue holding for long-term?
We caught up with a host of market experts on how they see the tech stocks panning out and the right investment strategy now –
‘Investors need to wait and watch’
Sumit Pokharna, VP and IT Analyst, Kotak Neo pointed out that “there are concerns that the new technology will lead to lower manpower, man-hours and work, and the billing rates will fall down, the efficiency will come so much that that might hit the revenue visibility for most of the IT companies. So it’s about machines doing more work compared to human beings. We believe that efficiency will definitely come but it’s too premature to say how much it will be when it comes to accuracy level and all that.”
According to him, he suggests, “investors to wait and watch a little bit more how things turn out in the near future. We might get a better entry point to buy quality stocks at a much more reasonable level. We believe in the short term it may not have a material impact on earnings. But in the medium term, we might see some pressure coming – maybe 5-7% impact on earnings. That is what we have considered in our valuation.”
‘Near-term weakness to continue’
Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services believes that the “near-term weakness could continue till the sentiments remain, but from a long-term perspective, again that because things are changing at a fast pace, while you can say that valuations are now comfortable, they are trading below their long-term averages, but that is the case because there is a big question on the growth.”
He highlighted the moot point to watch now is “What can be the growth, what will be the sustainable growth, all those things are there, so a cautious optimistic outlook can be there, but I would say that again, purely from a long-term perspective, if you see the Jan quarter post-results, Infosys particularly raised its revenue growth guidance, so things were looking up. The deals also were pretty strong, valuation as I said is now below historical averages.”
According to him, “long-term view is positive, but I think the near-term will also change, might change the outlook going forward.”
‘Recommend investors to stay on sidelines’
Market veteran, Ajay Bagga explained that “the AI disruption of IT business models has become a reality and not a potential future occurrence. Globally SaaS models are being marked down as AI models generate code , test and improve applications. Eventually SaaS business models will need to integrate these AI offerings in their suite of services and offer superior end uses.”
According to him, “The clarity on that journey is still not forthcoming and hence markets are pressing the eject button and selling off software company exposures . For now we would recommend investors to stay in the sidelines and not attempt any bottom fishing as the situation is too fluid and dynamic and we are not able to get signals of an imminent bottom to software companies pricing.”
‘Indian IT sector will adjust as per need’
Another widely respected voice and a market veteran, Ambareesh Baliga believes that the Indian IT sector has faced several similar situations in the past. “Indian IT firms have faced similar fears earlier and adjusted their models each time. During the Y2K phase, large teams moved from simple fixes to full software development and long-term client work. Later, when software-as-a-service and cloud platforms became common, many expected demand for IT services to fall. Instead, IT companies shifted into cloud migration, system integration, security, and ongoing management. Revenue and employee numbers grew through that period, showing that change did not stop growth.”
He sees , “the same pattern applies to artificial intelligence. Enterprises still need help cleaning data, connecting systems, managing risks, and fixing failures when automated tools break. These are areas where large IT firms already operate and can extend their role.”
‘IT business models robust’
Deven Choksey, Managing Director of DRChoksey FinServ is also fairly confident about the long-term implications. He said, “In my understanding, I think the Indian IT companies’ models are relatively robust. They are using AI in the right manner. They are using AI in the right manner. They are using AI. They have also started moving out their model from the time and cost basis to the outcome basis. I am pretty sure that these companies will have relatively better business to talk about because, value-wise, they will be in a much better position to provide solutions.”
Conclusion
Most analysts believe that Indian IT sector is likely to adjust its model as per the changing scenario. However, for the short-term, most experts believe that investors are better placed to stay on the sidelines in the near-term and see how the situation pans out. For the long-term they are confident about business prospects.