Indian shares trail regional peers on $68.6 billion IT rout over AI concerns

Core Viewpoint - Indian shares have underperformed compared to Asian and emerging market peers due to a significant decline in IT stocks, which have lost $68.6 billion in market value amid concerns over artificial intelligence disruptions [1][2]. Group 1: Market Performance - The Nifty 50 index has increased by 0.4% in February, while the Sensex has decreased by 0.1%, underperforming the MSCI Asia ex-Japan and MSCI Emerging Markets indexes [2]. - The IT sector, which constitutes approximately 11% of the Nifty index, has been the primary driver of pressure on benchmark indexes, with the Nifty IT index down 21% and on track for its worst monthly performance in nearly 23 years [2][3]. Group 2: IT Sector Decline - All ten constituents of the Nifty IT index have experienced declines ranging from 16.8% to 27% in February, with Coforge being the largest percentage loser at 26.8% [3]. - Tata Consultancy Services (TCS) and Infosys have led the market value erosion, losing approximately $21.9 billion and $16.3 billion, respectively [3]. Group 3: Investor Concerns - The selloff reflects rising fears that advancements in automation could disrupt the labor-intensive delivery model of India's $300 billion IT services industry, potentially compressing project timelines and reducing billable hours [3][4]. - Analysts have indicated that the narrative surrounding AI's impact on the IT sector may be too strong to dismiss in the short term, raising concerns about the long-term viability of IT services [4]. Group 4: Foreign Investment Trends - Foreign portfolio investors (FPIs) have withdrawn about 110 billion rupees ($1.21 billion) from Indian IT stocks in the first half of February, following a record net selling of 750 billion rupees in 2025 [6]. - Despite overall inflows of 196.75 billion rupees into Indian stocks in February, the IT sector has seen intensified foreign selling, indicating a lack of confidence among investors [6].