Indian Market Deep Dive: IT Sector’s ₹2.5 Lakh Crore AI Wipeout vs. Adani’s Nuclear Gambit and FPI Revival

Introduction

Thursday, February 12, 2026, stands as a landmark date for the Indian equity markets, characterized by a stark divergence between technological disruption and structural economic evolution. The headline indices faced significant pressure as the Sensex shed 558 points to close at 83,674 (-0.66%), while the Nifty 50 declined by 147 points to finish at 25,807 (-0.57%). This volatility was primarily sparked by a historic 4.7% crash in the Nifty IT index, a move that vaporized approximately ₹2.5 lakh crore in investor wealth in a single trading session.

For retail investors, however, the day's narrative extends far beyond the red screens of software giants. Beneath the surface, the market is digesting a series of monumental shifts: the Adani Group's foray into the long-guarded nuclear energy sector, the immediate balance sheet impact of the newly implemented Labour Codes, and the Reserve Bank of India's (RBI) strategic liberalization of bank lending to REITs. Simultaneously, a dramatic reversal in Foreign Portfolio Investment (FPI) flows suggests that global capital is once again finding value in India after a punishing three-month exodus.

This deep dive provides a comprehensive analysis of the seven key drivers reshaping the Indian investment landscape today, offering data-driven insights into the risks and opportunities emerging from this period of rapid metamorphosis.

1. The Anthropic Shock: AI Automation and the IT Existential Crisis

The Catalyst of the Crash

On February 12, 2026, the Indian IT sector suffered its most devastating single-day rout since the pandemic lows of March 2020. The Nifty IT index plummeted 4.7% to a four-month low of 33,442. The primary trigger was the market's reaction to Anthropic’s Claude Cowork, an advanced agentic AI tool unveiled in late January. This AI agent is capable of autonomously executing the high-volume knowledge work—such as legal contract reviews, regulatory tracking, and routine coding—that has long been the bread and butter of India's $300 billion outsourcing industry.

Redefining the IT Business Model

The fundamental threat lies in the erosion of the labor arbitrage model. Traditionally, Indian firms have charged Western clients on a "man-day billing" basis—selling the time of human engineers. If AI agents like Claude Cowork can complete tasks in hours that previously took 50-person teams weeks to finish, the revenue model faces a collapse in billable hours. Analysts estimate the total value destruction from this single-day sell-off at $18 billion.

While majors like Tata Consultancy Services (TCS) have reported $1.8 billion in annualized AI services revenue (approx. 5% of quarterly turnover), experts warn that the compression of project timelines will hit margins. For instance, a modernization project that once took 18 months may now take only six months, fundamentally altering revenue recognition and employee utilization rates.

2. Adani's Nuclear Gambit: Breaking the State Monopoly

In a historic policy shift, the Indian government has opened the nuclear power sector to private participation after seven decades of exclusive state control through the Nuclear Power Corporation of India Limited (NPCIL). Seizing this opportunity, Adani Power Limited incorporated Adani Atomic Energy Limited (AAEL) on February 11, 2026.

Strategic Importance

• Capacity Gap: India currently operates only 8.8 GW of nuclear capacity (less than 2% of total power). The government aims for a massive ramp-up to achieve carbon-neutrality targets.
• Baseload Power: Unlike solar or wind, nuclear provides stable, 24/7 power, making it a crucial replacement for coal-fired plants as environmental compliance costs rise.
• Competitive Landscape: Tata Power is also reportedly evaluating three sites for nuclear projects, indicating a new race for nuclear dominance among India's largest conglomerates.

While nuclear projects have long gestation periods (8-12 years) and high capital intensity, the strategic optionality for Adani Power is immense. Analysts suggest that even 2-3 GW of nuclear capacity by the mid-2030s would provide a high-margin, 60-year contracted revenue stream.

3. The Labour Code Revolution: Corporate Balance Sheet Revisions

Since the implementation of the four consolidated Labour Codes on November 21, 2025, Indian corporations have begun booking heavy one-time provisions. These costs are primarily driven by the new definition of "wages" for gratuity calculations.

Key Changes and Financial Impacts

1. Wage Definition: Wages must now constitute at least 50% of an employee’s Cost-to-Company (CTC). Any allowances exceeding 50% must be added back to the wage base, mechanically increasing gratuity liabilities.
2. Eligibility: For fixed-term employees, the gratuity eligibility period has been slashed from five years to just one year.

These provisions, while non-cash in the immediate sense, represent a structural increase in long-term employee costs, particularly for labor-intensive sectors like IT, manufacturing, and retail.

4. RBI Opens REIT Lending: A New Era for Real Estate Finance

Effective April 1, 2026, commercial banks will be permitted to finance Real Estate Investment Trusts (REITs) directly. This policy shift, announced by the RBI on February 6, is a game-changer for the ₹1 lakh crore Indian REIT market.

Benefits of Bank Lending to REITs:

• Lower Cost of Capital: Bank loans are typically 100-150 bps cheaper than the NBFC or bond market financing previously used by REITs.
• Currency Risk Mitigation: Many REITs previously borrowed in dollars or yen; access to rupee-denominated bank loans eliminates expensive hedging costs.
• Improved Distributions: Lower interest outgo translates directly into higher Distributable Cash Flow (DCF) for unit holders.

Market participants saw modest gains in Mindspace Business Parks REIT (+0.9%), Brookfield India Real Estate Trust (+0.2%), and Nexus Select Trust (+0.5%) following the clarification of these norms.

5. HUL’s Demerger Windfall vs. Operational Reality

Hindustan Unilever Limited (HUL) reported a staggering 120% surge in net profit to ₹6,603 crore for Q3 FY26. However, retail investors must look beyond this headline number.

The Data Breakdown

• Exceptional Gain: ₹4,611 crore was booked from the demerger of the ice cream business (Kwality Walls).
• Core Performance: When excluding exceptionals, core PAT stood at ₹2,118 crore, which is actually lower than the previous year’s ₹2,989 crore (on a comparable basis).
• Margin Pressure: EBITDA margins compressed by 70 bps to 23.3% due to raw material inflation (palm oil and packaging).
• Segment Divergence: Beauty & Wellbeing grew 11%, while Home Care lagged with only 3% growth, reflecting price-sensitive consumer behavior.

Despite the profit "jump," the stock fell 0.9% to ₹2,440.80, as the market priced in the margin squeeze and the ₹576 crore labour code provision.

6. FPIs Return: The ₹11,600 Crore Reversal

After a brutal period where Foreign Portfolio Investors (FPIs) pulled out ₹58,573 crore (Dec '25 - Jan '26), February has seen a dramatic sentiment shift. Between February 1-11, FPIs pumped ₹11,600 crore back into Indian equities.

Why are they back?

• Trade Deal Resolution: The US-India interim trade deal removed the 25% penalty on Russian oil purchases, stabilizing the external account.
• Valuation Normalization: The Nifty 50's premium to the MSCI Emerging Markets index has cooled from 2.0x to a more attractive 1.6x.
• Rupee Strength: The INR strengthened to 90.40 per US dollar on February 12, reducing the currency risk for foreign funds.
• DII Support: Domestic Institutional Investors (DIIs) absorbed ₹1,10,813 crore during the sell-off, proving the resilience of the domestic market and giving FPIs confidence to re-enter.

7. Lenskart’s Profitability Inflection: The Post-IPO Payoff

Lenskart Solutions has successfully transitioned from a "growth-at-any-cost" startup to a profitable scale player. In Q3 FY26, the company reported a 70-fold jump in PAT to ₹132.7 crore.

CEO Peyush Bansal noted that the company’s "AI-first" model—utilizing virtual try-ons and ML-based inventory optimization—is creating structural operating leverage. With 81 lakh active Gold members and a successful turn into profitability for its international business (₹32.5 crore profit vs. ₹42.5 crore loss last year), Lenskart is emerging as a rare profitable growth story in the retail tech space.

Key Takeaways for Retail Investors

• IT Sector Volatility: The Nifty IT crash of 4.7% highlights the real-world impact of AI tools like Claude Cowork. Watch for a shift from quantity-based billing to value-based consulting.
• Labour Code Impact: Companies like HUL and Ashok Leyland are booking massive provisions (up to ₹576 crore). Expect more large-cap firms to report similar charges in the coming quarters.
• Sectoral Rotation: While IT is under pressure, Financials and Autos are showing strength. Bajaj Finance rallied 2.65%, and ICICI Bank rose 1.48% as investors rotated capital.
• Nuclear Opportunity: The opening of the nuclear sector is a decade-long play. Adani Power and Tata Power are the primary stocks to monitor for developments in this space.
• FPI Flows: The ₹11,600 crore inflow in early February suggests a floor may have been established for the current correction.

What This Means for Investors

Historical trends indicate that during periods of massive technological disruption, market leadership often shifts. The current "AI Shock" in the IT sector may lead to a multi-year de-rating of companies that fail to adapt their billing models. Data suggests that the transition to the new Labour Codes will cause a short-term dip in reported earnings across the board, but this is a one-time accounting adjustment rather than a loss of business fundamental.

Investors may consider monitoring the CPI Inflation Data (expected at 2.4% under the new series) and the Q4 FY26 earnings season to validate if domestic consumption continues its 18% growth trajectory seen in January's auto sales. In this environment, a diversified portfolio—balancing the risks in IT with the tailwinds in Renewables/Nuclear, Financials, and Profitable Retail—is likely to be the most resilient strategy.