Indian IT stocks extended losses after a sharp fall in US-listed ADRs, as fresh advances in artificial intelligence reignited concerns over automation-led disruption in enterprise software and outsourcing models
Indian IT stocks extended their slide on Friday after a sharp overnight correction in US-listed shares reignited fears that rapid advances in artificial intelligence could disrupt the sector’s traditional outsourcing model.
ADRs of Infosys plunged 9.8 per cent on US exchanges on Thursday, while Wipro fell 4.6 per cent. The weakness quickly spilled into domestic trade, intensifying pressure on frontline technology counters.
Why the stocks slid
The immediate trigger was the launch of Claude Opus 4.6 by US-based AI firm Anthropic, which has heightened investor concerns that next-generation large language models can automate coding, software testing and enterprise workflows more efficiently than before.
For Indian IT companies, a significant share of revenues comes from application development, maintenance, system integration and long-term enterprise software contracts. Investors fear that rapid AI-driven automation could compress billing hours, reduce workforce intensity and alter the economics of traditional time-and-material contracts.
The selloff was amplified by global weakness in software stocks, which have collectively shed close to $1 trillion in market capitalisation in recent sessions.
Domestic IT stocks under pressure
The Nifty IT index fell 937 points, or 2.83 per cent, to 32,222.90 in morning trade on Friday, extending its losses after a 5.5 per cent drop on Thursday—its second sharp decline this month. The sector has erased more than $52 billion in market value over the past week.
Heavyweights led the decline. TCS fell 3.05 per cent, Infosys dropped 3.91 per cent, HCL Technologies slipped 2.08 per cent and Wipro declined 2.57 per cent around 11:30 am IST. Tech Mahindra also traded lower.
The broader market was dragged down by IT’s weakness. The BSE Sensex declined 818.97 points, or 0.98 per cent, to 82,855.95. Hindustan Unilever, Adani Ports, and Reliance Industries also traded 1.6–2 per cent lower as risk appetite weakened.
The IT sector’s weight in the Nifty50 index has slipped to 9.2 per cent from 10.8 per cent at the start of February, reflecting sustained investor repositioning away from the space.
Brokerages split on disruption risk
Brokerage commentary suggests the debate is less about whether AI will reshape the sector, and more about how quickly.
Citi said AI represents a broader structural shift compared to the cloud adoption cycle, when Indian IT firms benefited from migration mandates. The bank cautioned that emerging AI-related revenues remain small and exploratory, unlikely to offset near-term pressure on legacy services.
In contrast, HSBC argued that displacement risks to core enterprise platforms remain limited. Large corporations continue to rely on foundational systems such as SAP and Salesforce, where decades of embedded processes and compliance layers create significant switching costs.
HSBC estimates industry-wide coding productivity gains of 8–10 per cent, with Claude Opus 4.6 potentially adding another 500 basis points. While such efficiencies may exert pricing pressure over time, the brokerage expects limited immediate revenue disruption.
Valuations resetting
Thursday’s session had already signalled stress. TCS touched its lowest level since December 2020, while Infosys closed near Rs 1,386—its weakest since November 2023. HCL Technologies, Tech Mahindra and Wipro also fell between 5 per cent and 6 per cent.
As of 11:16 IST on Friday, the BSE SENSEX stood at 82,855.95, down 818.97 points, while the Nifty IT index was at 32,222.90, down 937.30 points.
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