Shares of Indian information technology (IT) companies faced heavy selling on Friday, resulting in the Nifty IT index declining by over 4%, making it the worst-performing sectoral index. LTIMindtree was the top loser, falling nearly 6%, followed by Coforge, Infosys, and Mphasis, each down more than 5%. The Nifty IT index reached an intraday low of 28,978.15, down 1,146 points. In contrast, the Nifty 50 index was down 1.05%, closing at 23,919.95. Analysts have raised concerns about deflationary pressures from Generative AI, which could lead to a 2-3% annual decline in traditional IT services revenue as automation reduces the need for manpower in legacy projects. Additionally, Infosys's weak growth outlook has dampened sentiment in the sector. The company reported its Q4FY26 results with revenue and margins falling short of expectations, projecting a revenue growth guidance of only 1.5-3.5% for FY27, which is below the anticipated 2-4%. Despite these challenges, some analysts remain optimistic about Infosys due to strong deal wins, although they have revised earnings per share estimates down by 1-2% for FY27-28. Overall, the medium-to-long-term outlook for the IT sector appears bleak, with revenue growth expected to slow further, but a tactical upside of 10-15% may be possible in the short term as valuations have become more appealing.