Shares of Infosys, the second-largest IT services company in India, have witnessed a sharp decline during February 2026, marking one of the most significant downturns for the stock in more than a decade. The Infosys share price has fallen by over 20% in a single month, raising concerns among investors and analysts about the broader outlook for the Indian technology sector.

The decline is largely attributed to growing fears that artificial intelligence could disrupt traditional IT services business models, particularly those that depend heavily on application development and maintenance services. The sell-off has wiped out massive shareholder wealth and triggered heavy losses for several institutional investors.

The sharp drop has also coincided with widespread selling in technology stocks globally, as investors reassess the potential impact of rapid AI advancements on the IT services industry.

Infosys Faces Worst Monthly Drop in Over a Decade

The Infosys stock crash February 2026 has resulted in the company recording its worst monthly performance in over 13 years.

During February, the Infosys share price slipped by 20.34%, dropping to around ₹1,308 per share on Indian stock exchanges.

This marks the steepest decline since April 2013, when the stock had plunged 22.75% in a single month.

The fall is also significant because it occurred after a four-month winning streak in the IT sector, during which investors remained optimistic about the growth prospects of technology companies.

However, that optimism quickly turned into panic selling as new developments in artificial intelligence began to reshape market sentiment.

Massive Market Capitalisation Loss

One of the most striking impacts of the sell-off has been the massive erosion in the company’s market value.

The fall in the Infosys share price news has wiped out nearly ₹1,33,824 crore in market capitalisation.

At its peak valuation earlier, Infosys had a market capitalisation of approximately ₹8.37 lakh crore.

The sudden drop in stock price has therefore led to a substantial decline in shareholder wealth and investor confidence.

Large-cap stocks like Infosys play a crucial role in the Indian equity market, and sharp corrections in such companies often have wide implications for overall market sentiment.

Domestic Mutual Funds Take Heavy Hit

The fall in the Infosys share price latest news has significantly affected domestic mutual funds, which hold a sizeable stake in the company.

According to market data, 45 mutual fund schemes collectively owned about 22.12% stake in Infosys at the end of the December quarter.

This stake was slightly higher than the 20.05% ownership recorded in the same period last year.

However, the decline in stock price has resulted in a notional loss of approximately ₹41,892 crore for domestic fund houses.

When the stock was trading near its 52-week high of ₹1,775 per share, the value of mutual fund holdings stood at ₹1,59,223 crore.

Following the sharp correction, the value of these investments has fallen to ₹1,17,331 crore.

Such losses highlight how large institutional investors are directly impacted by volatility in major technology stocks.

Major Mutual Fund Investors in Infosys

Several leading asset management companies have significant exposure to Infosys.

Some of the largest investors include:

• SBI Mutual Fund with a 4.66% stake

• ICICI Prudential Mutual Fund holding 4.11%

• HDFC Mutual Fund with 1.86% stake

• UTI Mutual Fund holding 1.81% stake

These large investments demonstrate the strategic importance of Infosys within Indian mutual fund portfolios, especially in funds focused on large-cap stocks.

When such stocks experience steep corrections, it often leads to significant valuation losses across multiple investment schemes.

Foreign Institutional Investors Continue Selling

Another key factor contributing to the stock’s decline has been aggressive selling by foreign investors.

Foreign Portfolio Investors currently hold approximately 30.3% stake in Infosys, making them one of the largest investor groups in the company.

However, data from National Securities Depository Limited indicates that FPIs have been reducing their exposure to Indian IT stocks.

In the first half of February 2026 alone, foreign investors sold around ₹11,000 crore worth of IT stocks.

As a result, their combined investments in the sector fell to ₹4,48,938 crore, which represents the lowest level in four years.

This trend reflects growing concerns among overseas investors about the future growth prospects of India’s IT services sector.

AI Disruption Fears Shake IT Stocks

The sell-off in Indian IT stocks selloff news has largely been triggered by concerns related to rapid advancements in artificial intelligence technologies.

New AI tools launched by companies such as Anthropic have sparked fears that traditional IT services could face disruption.

The company recently unveiled advanced AI products, including the Claude Cowork Agent, which demonstrated capabilities in coding, automation, and software development.

These innovations have raised concerns that AI-powered automation could replace several tasks currently handled by IT services companies.

India’s IT sector is estimated to be worth around $300 billion, and it relies heavily on human workforce-driven services.

If AI significantly automates software development, testing, and maintenance, the business model of many IT firms could face structural changes.

Nifty IT Index Suffers Major Decline

The broader technology sector has also been hit by the growing concerns.

The Nifty IT Index has declined 19.13% during February, making it one of the worst-performing sectoral indices in the Indian stock market.

At one point during the month, the index had fallen by over 21%, reaching its lowest level since November 2023.

Several other technology companies also experienced sharp declines in their share prices as investors rushed to reduce exposure to the sector.

Application Services Revenue Under Threat

One of the biggest concerns highlighted by analysts is the potential impact of AI on application services revenue.

Application development, maintenance, and support services typically account for 40% to 70% of total revenue for Indian IT companies.

These services include activities such as:

• Software development

• Application maintenance

• System integration

• Testing and quality assurance

However, modern AI tools are becoming increasingly capable of automating many of these tasks, which could significantly reduce demand for traditional IT services.

Brokerage firms have therefore warned that if AI adoption accelerates rapidly, it may put pressure on revenue growth and profitability in the IT sector.

Global Tech Selloff Adds to Market Panic

The situation has been further intensified by a global selloff in technology stocks.

Concerns about AI disruption have triggered declines in major tech companies worldwide.

Investors are now trying to assess whether AI will create new opportunities or fundamentally reshape existing technology business models.

For Indian IT companies that rely heavily on outsourcing contracts and service-based revenue, the emergence of powerful AI systems represents both a potential opportunity and a major challenge.

Market Outlook for Infosys

Despite the current decline, analysts remain divided about the long-term outlook for Infosys.

Some experts believe that AI could actually create new demand for technology services, particularly in areas such as:

• AI implementation

• Data analytics

• Cloud infrastructure

• Cybersecurity

Companies that successfully integrate AI into their services could potentially benefit from a new wave of digital transformation projects.

However, in the short term, investor sentiment remains cautious as markets continue to evaluate how AI will reshape the technology landscape.

Conclusion

The sharp fall in Infosys share price during February 2026 highlights the growing impact of artificial intelligence concerns on the global technology sector.

With the stock dropping more than 20% in a single month, the company is on track for its worst monthly performance in 13 years.

The sell-off has erased over ₹1.33 lakh crore in market value, while domestic mutual funds and foreign investors have suffered substantial losses.

At the same time, the broader Nifty IT Index and other technology stocks have also experienced sharp declines as investors reassess the future of the industry.

As AI continues to evolve rapidly, the coming months will be crucial in determining whether Indian IT companies can adapt to the new technological landscape or face prolonged market pressur.

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