Battered IT Loses Weight on Nifty, Banking Hits New High
The decline in IT stocks’ prominence in the Nifty index marks a significant trend. As of the beginning of 2025, the IT sector held a weight of 13.05% on the benchmark. However, recent developments indicate a shift as banking stocks rise to occupy a more substantial share.
Declining Influence of IT Stocks
– The free-float weight of IT stocks in the Nifty has dropped to 8.7% as of February 16, down from 9.94% at the start of 2026, according to data from ETIG.
– In contrast, banks have increased their weighting from 26.61% to 27.6% during the same period.
– The decline in IT’s share has allowed the oil and gas sector, spearheaded by Reliance Industries, to emerge as the second most influential sector at 9.36%.
In any market index, the weights assigned to sectors determine their influence on overall movements. This shift reflects which sectors are currently driving earnings and liquidity.
Commentary from Experts
“There has been a clear shift in the relative weights among the two heavyweight sectors, as the benchmark’s weight is determined by free float market capitalization,” noted Sunny Agrawal, Head of Fundamental Research at SBI Securities. He explained that the reduction in IT’s relative weight stems from its underperformance compared to other sectors experiencing faster growth.
The downturn in the Nifty IT index this year is notable, plunging over 13%, while the Bank Nifty has risen approximately 2.3%. Overall, the Nifty itself slipped 1.7% during the same timeframe. A considerable portion of this decline stems from last week’s sell-off in software stocks, precipitated by rising concerns over potential AI disruptions affecting investor confidence.
Earnings Trajectory Shift
The shift in weight for banking and IT stocks on Nifty 50 correlates with changes in the earnings trajectory for both sectors in recent years, stated Dharmesh Kant, Head of Research at Cholamandalam Securities. While fears surrounding AI disruption are recent, Kant highlighted that Indian IT stocks had already faced stagnation due to shrinking investments in the software services they predominantly offer.
The Nifty IT index is down by more than 20% in the past year, contrasting sharply with the 24% rise in the Bank Nifty. Concerns regarding the prospects of Indian software services led to significant foreign investor sell-offs, totaling nearly ₹75,000 crore in 2025, the highest selling across all sectors that year. In comparison, financials witnessed a lesser sell-off of ₹14,900 crore.
Sriram Velayudhan, Senior Vice President at IIFL Capital Services, pointed out that active foreign funds have steadily reduced their exposure to the Indian IT sector over the past year. Although the pace of foreign selling has slowed, investors remain cautious as they evaluate the implications of AI disruption.
Conclusion
The recent sell-off signifies a critical transformation in the Nifty landscape, with IT stocks losing weight while banking rises to new heights. As the market evolves, stakeholders must remain vigilant, continuously assessing shifting dynamics and their potential impacts on investment strategies.