Battered IT loses weight on Nifty, banking hits new high

Mumbai: The recent sell-off in information technology (IT) stocks has lessened their influence on moves in the benchmark Nifty, ceding more power to banks, whose share 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% as of February 16 from 9.94 at the start of 2026, according to data from ETIG. At the same time, banks’ weight has increased to 27.6% from 26.61% over the same period. The waning IT weight has resulted in the oil & gas sector, led by Reliance Industries, emerging as the second most influential bunch at 9.36%.

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

“There has been a clear shift in the relative weights among the two heavyweight sectors, since the weight on the benchmark is assigned based on free float market cap,” said Sunny Agrawal, head of Fundamental Research at SBI Securities.

There is a reduction in the relative weight for IT, given its underperformance versus other sectors that have grown at a relatively faster pace, said Agrawal.

So far this year, the Nifty IT index has plunged more than 13% against the 2.3% upmove in the Bank Nifty, while the Nifty has fallen 1.7% over the same period. A significant portion of the decline came from last week’s sell-off in software stocks, when fears of AI disruption flared, denting investor sentiment.

The decline in IT stocks’ influence in the Nifty has not been recent. The sector’s weight on the benchmark was at 13.05% at the beginning of 2025. “The shift in weight for banking and IT stocks on Nifty 50 has moved in tandem with the change in earnings trajectory for both the 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 stagnating before this due to limited or reduced spending on the software services that they predominantly provide,” said Kant.

The Nifty IT index is down more than 20% over the past year, while the Bank Nifty is up about 24% in this period.

Concerns over the Indian software services‘ prospects resulted in overseas investors dumping shares worth almost ₹75,000 crore in 2025 – the highest selling across sectors in the year. They sold financials worth ₹14,900 crore last year

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

Though the intensity of foreign selling has eased, investors are expected to remain cautious as they assess the impact of AI disruption, he said.