Infosys down 18%, TCS falls 14%: Buy the dip or avoid IT stocks now?

India’s leading IT stocks have seen a steep correction over the past month, raising concerns among investors. Infosys has fallen nearly 18%, while Tata Consultancy Services (TCS) is down about 14%.

For a sector known for stability and consistent returns, the decline has triggered debate: is this panic selling, or a long-term buying opportunity?

Why IT stocks are falling

1. Global economic uncertainty

Large enterprises in the US and Europe — key markets for Indian IT firms — are slowing technology spending. When companies delay digital transformation projects, IT service providers face slower deal flows and weaker revenue growth prospects.

2. Artificial intelligence disruption fears

Rapid advancements in AI tools have intensified concerns about automation replacing traditional IT services such as coding, maintenance, and support.

This has created investor anxiety about whether the traditional outsourcing model could shrink in the future.

3. Valuation reset after high growth phase

When growth expectations decline, investors reduce the premium they are willing to pay. This adjustment is known as a valuation reset, not a business collapse.

Is this a structural problem?

Analysts suggest the correction does not signal a crisis.

AI cannot replace complex enterprise systems overnight. Large organisations rely on integrated platforms that require:

• compliance and regulatory oversight

• cybersecurity protection

• data governance

• system integration and customization

AI enhances productivity but still requires human expertise and technology services support.

How IT companies are adapting to AI

Indian IT firms are evolving beyond their traditional labour-arbitrage model.

Key transformation strategies:

• Building AI-driven platforms and proprietary solutions

• Moving toward IP-led revenue models

• Offering subscription-based digital platforms

• Providing AI integration and enterprise deployment services

Infosys and TCS are actively investing in AI partnerships, infrastructure, and enterprise adoption solutions to remain competitive.

What could trigger a deeper decline?

A larger and sustained crash would likely require:

• a severe global recession

• major contract cancellations

• clear evidence that AI is replacing large-scale IT services work

At present, these risks remain potential rather than reality.

Should investors buy IT stocks now?

Reasons to consider buying

✔ valuations are closer to long-term averages
✔ AI adoption may create new growth opportunities
✔ Indian IT firms remain leaders in global tech services
✔ strong cash flows and balance sheets

Reasons to stay cautious

⚠ global tech spending remains uncertain
⚠ transition to AI-led models may pressure margins short term
⚠ deal conversion cycles may remain slow

Market outlook

The IT sector is undergoing transformation rather than decline. AI is shifting the industry toward higher-value services instead of eliminating demand.

Long-term investors may see the correction as an entry opportunity, while short-term investors may wait for clarity in global demand and deal pipelines.

Disclaimer: This article is for informational purposes only and should not be considered investment advice. Consult a financial advisor before making investment decisions.