Indian Markets Drop 1% on AI Fears, IT Hits 10-Month Low

Nifty lost 0.87 per cent during the week and dipped 1.30 per cent on the last trading day to 25,471. At Friday's close, the Sensex was down 1,048 points or 1.25 per cent at 82,626. It declined 1.14 per cent during the week.

Sectoral performance remained firmly negative, with all major indices ending in the red. Nifty Metal was the worst performer, dropping 3.3 per cent, followed by realty, down 2.2 per and FMCG, down 1.9 per cent.

The Nifty IT index touched a 10-month low before closing 1.4 per cent lower, even as selective buying helped it recover from intraday lows.

Analysts said the IT sector continues to face headwinds amid rising concerns that rapid AI advancements could disrupt traditional service models and weigh on future revenue visibility.

The US dollar strengthened on the back of stronger-than-expected US January jobs data, which reduced expectations of near-term interest rate cuts by the US Federal Reserve.

Dollar gained further traction amid media reports that Russia may consider re-entering the dollar settlement system as part of a potential economic understanding with the US, adding additional pressure on precious metals.

Analysts predicted that a "break below the 25,400 mark in Nifty could open the door for a move toward the 25,100 gap area. On the upside, the 25,700-26,000 zone is likely to act as a strong resistance band in case of any recovery."

Broader indices showed divergence from the benchmark indices during the week, with the Nifty Midcap100 only down 0.11 per cent, while Nifty Smallcap100 added 0.56 per cent.

Apart from IT, FMCG and realty also appear vulnerable to further declines, while banking, auto, energy and select metal stocks may continue to show relatively better strength, market participants said.

Looking ahead, investor attention is expected to shift toward global macro developments, with the earnings season drawing to a close, they said. Evolving geopolitical dynamics, and key takeaways from the 'India AI Impact Summit' scheduled in New Delhi next week, are other important cues for investors.

- IANS