India’s IT bellwether Infosys has dropped out of the country’s top 10 most valuable firms after losing over ₹2 lakh crore in market capitalisation this year, reflecting a significant shift in investor sentiment toward the sector.
The decline has been sharp, with the stock falling around 30% so far this year, including a steep sell-off following its latest earnings announcement.
With its market capitalisation now around ₹4.9 lakh crore, Infosys has slipped out of the top 10, while Life Insurance Corporation of India has entered the list with a valuation of around ₹5.1 lakh crore.
This is not merely about one company losing value – it signals a broader re-rating of India’s IT sector.
Infosys reported stable performance in the March quarter, with revenue rising 13% and profits also showing growth. However, the concern lies in its outlook. The company has projected revenue growth of just 1.5% to 3.5% for FY27, falling short of market expectations.
As a result, investors are beginning to question whether the IT sector’s high-growth phase is, at least temporarily, coming to an end.
Brokerages note that demand continues to remain weak, as global clients scale back spending and prioritise cost efficiency over expansion.
The slowdown is largely being driven by changing client behaviour.
Companies across industries are postponing large transformation projects and prioritising cost-cutting measures. This shift is directly affecting IT services firms like Infosys, whose revenues depend heavily on such deals.
At the same time, while large contracts are still being signed – Infosys reported $14.9 billion in deal wins for FY26 – the execution timelines are stretching, delaying revenue realisation.
AI: Opportunity or Risk?
A major overhang for the sector is artificial intelligence.
Infosys has been investing in AI platforms such as Topaz and rolling out AI tools across its workforce. However, analysts view AI as a double-edged sword.
While it is opening up new opportunities in areas like data, cloud, and automation, it is also reducing demand for traditional IT services.
“AI-driven productivity gains are being passed on to clients, leading to pricing pressure in the core business,” analysts note.
As a result, IT firms may have to deliver more work for the same – or even lower – revenue.
India Missed the AI Wave
Market experts say the issue extends beyond individual company performance and reflects a broader structural shift.
Navy Vijay Ramavat noted that India has not gained from the global AI boom in the same way as other markets.
“If you look at global markets like the NASDAQ Composite, they are hitting record highs driven by AI. But India has missed that AI wave,” he said.
He added that India’s core strength – its IT services sector – is now facing increasing pressure.
“Our flagship sector, which helped many Indians move from the lower-middle class to the upper-middle class, is IT. That very sector is now being disrupted. While the benefits of AI haven’t fully reached India, the downsides already have,” he said.
Navy Vijay Ramavat explained that this shift is part of a natural market cycle, where leadership rotates across sectors.
“In every bull run, new sectors take the lead. In the 2000s it was IT, then real estate, followed by capital goods, and later chemicals after Covid,” he noted.
According to him, the next phase of growth is likely to be driven by emerging industries.
“Currently, sectors like semiconductors, data centres, and manufacturing are gaining traction. Areas backed by strong government support tend to perform well,” he said.
He highlighted segments such as semiconductors, data centre infrastructure, CDMO (contract drug manufacturing), energy and power, and shipbuilding as key areas seeing increased policy backing and investment – positioning them as potential drivers of the next bull cycle.
Global Capital Flows Are Shifting
Another factor weighing on Indian IT stocks is the shift in global capital flows.
Investment is increasingly moving toward countries benefiting from AI-driven growth, such as the United States, South Korea, and Taiwan.
A significant share of foreign investment is now flowing into companies tied to semiconductors and AI infrastructure, leaving traditional IT services firms behind.
Infosys currently trades at around 18 times forward earnings, lower than earlier levels, indicating that valuations have adjusted to a more modest growth outlook.
Analysts note that the company is working to improve efficiency, exit low-margin contracts, and shift toward higher-value services. However, these changes are expected to take time to translate into earnings.
Infosys’ exit from India’s top 10 most valuable companies reflects a broader shift underway in the market.
The IT sector, once regarded as a consistent wealth generator, is now entering a phase of transition marked by slower growth and evolving business models.
At the same time, emerging sectors supported by government policies and global trends are increasingly drawing investor interest.