The Times Of India·2026-02-24 10:20Core Insights - The Nifty IT index experienced a significant decline of over 21% in February, marking its worst monthly performance since the 2008 financial crisis, driven by macroeconomic weaknesses and fears of disruption from AI technologies [4][8] - The announcement from AI startup Anthropic regarding its Claude tool's ability to streamline COBOL code heightened concerns about traditional IT service revenue streams, leading to a sharp selloff in tech stocks, including a 13% drop in IBM shares [4][8] - Despite the steep decline, the Nifty IT index is now trading at an eight-year low relative to the Nifty 500, attracting interest from contrarian investors seeking value opportunities [5][8] Market Sentiment and Expert Opinions - Market experts advise caution, emphasizing that while lower valuations may seem attractive, the sector is facing significant disruption and uncertainty regarding long-term growth [6][9] - Earnings growth in the IT sector has been sluggish, with historical growth rates remaining in single digits or barely reaching double digits, indicating underlying issues predating current AI concerns [6][9] - Analysts suggest that high dividend yields and free cash flow yields may not be sustainable if growth continues to weaken, and companies need to demonstrate clear strategies for adapting to AI technologies [6][9] Technical Analysis - Technical indicators suggest further downside risk for the Nifty IT index, with key support levels identified at 29,961, 28,800, and 27,200, while resistance is noted at 36,200 [7][9] - The index has entered a bearish phase, confirmed by breaking below crucial support levels and forming a pattern of lower highs and lower lows, indicating weakening momentum [7][9] - Experts recommend a wait-and-watch strategy, advising against new long positions and suggesting shorting opportunities on rebounds until clearer signs of growth stability emerge [8][9]