India stocks fall for third month as AI woes trump earnings, trade lift

Indian shares fell on Friday in broad-based declines led by financials, with benchmark indexes posting their third monthly decline, while IT stocks marked their worst month since September 2008 on fears that artificial intelligence could erode their earnings.

The selloff in IT overshadowed improving corporate earnings and easing trade tensions after India sealed a key trade deal with the European Union and reached an interim framework for an agreement with the U.S.

On the day, the Nifty 50 fell 1.25% to 25,178.65 and the BSE Sensex dropped 1.17% to 81,287.19. Heavyweight financials slid 1.6%, leading the losses.

For the month, the Nifty shed 0.6%, while the Sensex declined 1.2%.

The IT index tumbled 19.5% in February, its worst monthly performance since the global financial crisis rocked the world’s equity markets.

Its 10 constituents lost about $62.8 billion in market capitalisation this month after U.S. firms such as Anthropic and Palantir unveiled advances in AI automation tools.

“There is now a cloud of uncertainty hanging over the profitability and margin outlook for Indian IT companies because of AI,” said Saurabh Jain, assistant vice president of retail equities at SMC Global.

“The road ahead looks murky as investors ponder over the ability of software companies to reinvent their business models for an AI-driven world,” Jain added.

Excluding IT, 14 of the 15 other major sectors posted monthly gains. Broader small-cap and mid-cap indexes rose 0.3% and 1.2%, respectively.

Public sector banks advanced 8.9%, led by the country’s top lender State Bank of India, which gained 11.6% to record its best month since March 2025 on robust earnings.

The consumer durables index climbed 9.3% as government tax cuts lifted expectations of a demand revival and stronger earnings.

Overall, Nifty 50 companies posted 7.5% year-on-year profit growth in the December quarter, while firms in the broader BSE 500 index recorded a 16% expansion in profit, despite a one-time hit from labour-code adjustments.

“Banks, autos, energy and consumption-linked themes look especially attractive as earnings show resilience and trade worries fade,” said SMC Global’s Jain.

“But benchmarks may see further consolidation as IT remains a heavyweight drag on the market.”

Among stocks, Apollo Hospitals, Adani Enterprises and Eicher Motors rose 12.4%, 7% and 12.5%, respectively, on upbeat quarterly results.

Investors now await India’s GDP data for the December quarter, due after market close. The figures will be the first under the new series with the base year shifted to 2022–23 from 2011–12.