Battered IT loses weight on Nifty, banking reaches new high

Mumbai: The recent sell-off in information technology (IT) stocks has reduced their influence on moves in the benchmark Nifty, ceding more power to banks, whose stake in the key index has strengthened to new highs. The free float weight of IT stocks in the benchmark Nifty had fallen to 8.7% on February 16 from 9.94 in early 2026, according to ETIG data. At the same time, the weight of banks increased from 26.61% in the same period to 27.6%. The declining IT weight has led to the oil and gas sector, led by Reliance Industries, becoming the second most influential group at 9.36%.

In any market index, weights determine how much influence a stock or set of stocks has on the movement of the measure. Typically, weights show which sectors have the leading earnings and liquidity positions.

“There has been a marked shift in the relative weights between the two heavyweight sectors as the weightage is given to the benchmark on the basis of the free float market capitalisation,” said Sunny Agrawal, Head of Fundamental Research at SBI Securities.

There has been a decline in relative weight for IT given its underperformance against other sectors that have grown relatively faster, Agrawal said.

So far this year, the Nifty IT index has fallen over 13% against the Bank Nifty’s 2.3% rise, while the Nifty has fallen 1.7% in the same period. A significant portion of the decline was due to the sell-off in software stocks last week as fears of AI disruption flared, undermining investor sentiment.

The decline in the influence of IT stocks in the Nifty is not recent. The sector’s weight on the benchmark was 13.05% at the beginning of 2025. “The weight shift from banking and IT stocks on the Nifty 50 parallels the change in earnings trajectory for both sectors in recent years,” said Dharmesh Kant, head of research at Cholamandalam Securities.“The fear of AI disruption is a recent threat, but Indian IT stocks have been stagnant before due to limited or reduced spending on the software services they primarily provide,” Kant said.

The Nifty IT index has fallen over 20% in the past year, while the Bank Nifty has risen around 24% during this period.

Concerns over the prospects of Indian software services led foreign investors to dump shares worth nearly ₹75,000 crore in 2025 – the highest turnover across all sectors in the year. Last year, they sold financials worth ₹14,900 crore

“Active foreign funds have been consistently reducing their exposure to the Indian IT sector over the past year,” said Sriram Velayudhan, senior vice president at IIFL Capital Services.

Although the intensity of foreign sales has declined, investors are expected to remain cautious in assessing the impact of AI disruption, he said.