LIC and Mutual Funds Lose Over & ₹1 Lakh Crore as IT Stocks Crash
The Indian stock market is witnessing a significant tectonic shift as the Information Technology (IT) sector faces a brutal selloff, according to a recent report by Livemint. In just the first few weeks of February 2026, the wealth erosion has been staggering, specifically impacting institutional giants. Life Insurance Corporation of India (LIC) has reportedly seen a value depletion of approximately & ₹38,000 crore, while Mutual Funds (MFs) have faced an even steeper hit of & ₹63,000 crore. This collective loss of over & ₹1 lakh crore underscores a growing panic among investors regarding the long-term viability of traditional IT service models in an era dominated by rapid Artificial Intelligence (AI) advancements.
The AI Disruption Shadow Over Dalal Street
The primary catalyst for this massive exodus from IT stocks is the haunting fear of AI disruption. For decades, Indian IT firms have thrived on labor arbitrage and managed services. However, the emergence of sophisticated Generative AI and automated coding platforms has led to concerns that the traditional & quot;billable hours & quot; model is becoming obsolete. The market sentiment has worsened as TCS, Infosys, and HCL Tech bleed under the pressure of changing global demands. Analysts suggest that clients in the US and Europe are increasingly looking for AI-driven efficiency rather than large-scale human deployment.
LIC Portfolio Takes a Massive Hit
As the largest domestic institutional investor, LIC has deep exposure to the Nifty IT index. The recent downturn has seen its holdings in top-tier technology firms lose significant value. The & ₹38,000 crore loss is not just a number; it represents a decline in the valuation of safe-haven assets that millions of policyholders rely on. This selloff indicates that even long-term value investors are reassessing their weightage in technology stocks as structural risks become more apparent in the current fiscal environment.
The Anthropic Factor: Why IBM and Others Are Shaking
The global landscape is changing fast, and it is not just Indian firms feeling the heat. Recent innovations, such as the new AI tool of Anthropic that shakes IBM and other legacy giants, have proven that automation is no longer a future concept—it is a present reality. When global behemoths are forced to pivot their entire strategy to stay relevant against nimble AI startups, the ripple effects are felt instantly on Dalal Street, leading to the massive & ₹63,000 crore exit seen by domestic mutual funds.
Mutual Funds Face Redemption Pressure
Mutual funds, which manage the savings of retail investors, have seen a significant wipeout in the IT segment this February. Fund managers who were heavily overweight on tech are now scrambling to rebalance their portfolios. The volatility has led to a cautious stance among retail participants, who are questioning if the & quot;buy on dip & quot; strategy still applies to an industry facing a fundamental shift in its core business mechanics. To understand how broader indices are reacting, you can check the latest updates on the National Stock Exchange.
Why February Became a Month of Reckoning
The timing of this selloff coincides with several global tech giants announcing better-than-expected AI integration, which paradoxically signaled a warning for outsourcing firms. If global clients can use AI to do what thousands of junior developers used to do, the demand for offshore staffing naturally shrinks. This realization hit the Indian markets hard in February, leading to a cascading effect of world tech stocks being re-evaluated for their & quot;AI-readiness & quot; and long-term sustainability.
Comparing IT Giants of World Markets
When we look at the tech giants of world markets, there is a clear divide between those providing AI infrastructure and those providing manual services. While hardware and cloud providers are seeing record highs, service-based firms in India are struggling to pivot. The market is currently rewarding innovators while punishing those perceived to be lagging in the AI race. This divergence has caused the Nifty IT index to underperform significantly compared to other sectoral indices like Banking or Auto.
The Role of Foreign Institutional Investors (FIIs)
It is not just LIC and MFs; Foreign Institutional Investors have also been offloading their stakes in Indian tech. The global macro environment, combined with sector-specific fears, has made Indian IT a less attractive destination for & quot;hot money & quot;. FIIs are moving capital toward markets that offer more direct exposure to generative AI development, further exacerbating the liquidity drain in the Indian IT space during this volatile month.
Is the Mid-Cap IT Segment Safer?
Interestingly, while the large-cap stocks like Infosys and Wipro took the brunt of the hit, mid-cap IT stocks have also not been spared. Earlier, investors believed that niche mid-cap players would be more agile in adopting AI. However, the February data shows a blanket selloff across the board. The contagion of fear has reached every corner of the technology sector, leaving no safe harbor for investors looking for quick recoveries.
Expert Warnings on Portfolio Diversification
Financial advisors are now urging a move toward diversification. The heavy reliance on IT to drive portfolio returns is being questioned. Many suggest looking at sectors that are & quot;AI-shielded & quot; or those that will benefit from AI implementation rather than those whose workforce could be replaced by it. Diversification into manufacturing, green energy, or consumption-led sectors is becoming a popular theme for those looking to offset their IT losses.
The Impact on Retail SIP Investors
For the common man investing through Systematic Investment Plans (SIPs), the decline in Net Asset Values (NAVs) of technology-focused funds has been a wake-up call. February has been a testing month for the patience of retail investors. While the long-term story of India as a tech hub remains, the short-term pain is real and visible in the shrinking corpus of thousands of equity portfolios managed by top fund houses.
Future Outlook: Rebound or Structural Decline?
The million-dollar question is whether this is a temporary dip or the beginning of a long-term structural decline. Some analysts argue that Indian IT will eventually adapt and use AI to offer even better services. Others remain skeptical, believing that the peak of the outsourcing era has passed. The next few quarters will be crucial as companies report their earnings and, more importantly, their AI-related deal wins and transition strategies.
Source & AI Information: External links in this article are provided for informational reference to authoritative sources. This content was drafted with the assistance of Artificial Intelligence tools to ensure comprehensive coverage, and subsequently reviewed by a human editor prior to publication.
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