February 2026 was the month when the the "old world" of trade tariffs and geopolitical resets collided head-on with the "new world" of generative AI. While India celebrated T20 victories, and watched Arif Khan carve history into Italian snow, Dalal Street was grappling with a full-blown tech panic. The Nifty IT index plunged nearly 20% in February - its worst monthly fall since September 2008 - as fears of AI disruption and tariff uncertainty shook investor confidence.
It was a month of whiplash: diplomacy breakthroughs, judicial bombshells, solar duties, and a market contagion that spared few sectors.
Trade Optimism and Sporting Highs
On February 6, Prime Minister Narendra Modi and US President Donald Trump announced an Interim Trade Framework. India cut tariffs on US agricultural goods like apples, pecans and wine, while the US lowered reciprocal tariffs on Indian textiles and leather from 25% to 18%. Markets initially cheered the breakthrough, seeing it as a step toward restoring export competitiveness.
The same day, the Milano-Cortina Winter Olympics opened in Italy, with skier Arif Khan leading India's contingent. A day later, the ICC Men's T20 World Cup 2026 began, co-hosted by India and Sri Lanka. India's dominant opening win against the USA in Mumbai set a celebratory tone.
The AI "Reality Check"
Then came the "Claude Crash." Between February 13 and 15, AI firm Anthropic released a version of its Claude model capable of autonomously rewriting legacy enterprise code. What tech circles hailed as innovation, markets interpreted as existential risk.
Investors feared that maintenance-heavy revenue models - long the backbone of traditional IT services firms - could be structurally disrupted. The result was the steepest tech sell-off since the global financial crisis. By month-end, the Nifty IT index was down nearly 19.7% for February alone, with average IT returns across the last 10 sessions at -3.1%. It marked the worst monthly decline since 2008.
The broader market was volatile but not uniformly weak. While the Nifty 50 eked out a 0.7% gain in February, sectoral dispersion was stark. Metals rose 5.3%, Energy gained 5.8%, Autos climbed 7.3%, and Pharma also advanced 7.3%. Banks added 2.7%.
Yet breadth was negative: 6 of the last 10 sessions for the Nifty were in the red. Midcaps and smallcaps showed mixed strength, rising 2.34% and 1.4% respectively in February but with weak average returns.
India's AI Leadership vs Global Legal Shock
Ironically, as global markets punished tech, India positioned itself as an AI rule-maker. From February 16 to 21, New Delhi hosted the India AI Impact Summit at Bharat Mandapam, drawing participation from over 80 countries. The IndiaAI Mission pushed sovereign LLMs for Indian languages and an "AI for All" framework.
But global volatility intensified on February 20 when the US Supreme Court ruled (6-3) in Learning Resources Inc. v. Trump that the President lacked authority to impose broad tariffs under IEEPA without Congressional approval. The decision destabilised the legal foundation of existing tariff structures and triggered immediate volatility in global shipping and export-oriented stocks.
Solar Shock and Diplomatic Resets
On February 24, the US bypassed the SCOTUS ruling using alternative statutes to impose a preliminary 125.87% duty on Indian solar cells. The move hit India's green energy exporters and introduced fresh uncertainty into trade equations that had just shown signs of easing.
Meanwhile, geopolitics remained active. PM Modi's state visit to Israel on February 25 elevated ties to a "Special Strategic Partnership," focusing on AI defence systems and infrastructure corridors.
On February 27, Canadian PM Mark Carney arrived in Mumbai for a diplomatic reset, discussing uranium supply and infrastructure investments.
The last trading session of the market ended as a "Black Friday" for the markets. Between AI disruption fears, the MSCI rejig, and tariff uncertainty, Indian IT majors saw their steepest monthly decline in nearly two decades.
Old economy sectors - metals, energy, autos, pharma - outperformed. Tech cracked under the weight of structural disruption fears. FMCG and real estate delivered modest gains but weak average returns. Banks held up but lacked breakout momentum.
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