IT Stocks Slide as AI Disruption Fears and Surging US Treasury Yields Hit Infosys, TCS, HCLTech

India's information technology stocks were the worst-performing sector on Dalal Street on Tuesday, with the Nifty IT index sliding as much as 2% intraday and dragging the broader Sensex and Nifty off their early highs. The selloff underscored how quickly sentiment around the sector can sour even after periods of relative stability, as two familiar pressures, rising US bond yields and unresolved anxiety about artificial intelligence's effect on services demand, resurfaced together.

HCL Technologies led the declines among large-cap IT names, falling close to 3%, followed by Mphasis, Infosys and Tech Mahindra, each down more than 1.5%. Tata Consultancy Services, Persistent Systems, Coforge and Wipro also traded lower, rounding out a broad-based retreat across the sector rather than weakness confined to any single company.

The immediate trigger was a sharp move in US Treasury yields, with the 10-year yield climbing back above the 4.9% mark overnight. Higher US yields tend to weigh on richly valued, export-oriented sectors like Indian IT, both because they raise the discount rate applied to future earnings and because they often coincide with a broader shift of global capital away from emerging-market equities and back into US fixed income.

Layered on top of that was a more structural concern that has hung over the sector for much of this year: whether generative AI tools will erode the volume of traditional services work that Indian IT majors have historically billed by the hour or by the project. Commentary from company managements through the July-to-September quarter has remained cautious, with executives citing a mix of weak macro conditions, geopolitical uncertainty, elevated interest rates and muted discretionary technology spending among large enterprise clients. Analysts have flagged particular downside risk for Infosys and Wipro in this environment, while describing Tata Consultancy Services as cautious and HCLTech's demand commentary as comparatively the most resilient among the large-caps.

Even so, brokerage views on the sector have not turned uniformly negative. Global brokerage CLSA has maintained a "Hold" rating on TCS, Infosys and HCL Technologies, reserving its more bearish "Underperform" call for Wipro alone, and has noted that order books and employee headcounts across the sector are expected to stay broadly stable in the near term. That, the brokerage argues, should limit the risk of an abrupt, AI-driven disruption to either new deal signings or IT employment in the short run, even if the longer-term implications of AI adoption on services pricing remain an open question.

For now, Tuesday's move looks more like a sentiment-driven pullback tied to global rate dynamics than a fundamental reassessment of the sector's prospects, but it is a reminder that Indian IT stocks remain unusually sensitive to swings in US bond markets, a dynamic likely to persist as long as questions about the pace of AI adoption stay unresolved.

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