Indian IT stocks tumble as AI disruption sparks sell-off

Indian IT stocks plunged 5–8% as Anthropic’s AI tools raised fears of outsourcing disruption, with global tech sell-off adding to investor jitters

Shares of India’s leading IT companies fell sharply today, rattled by global technology market weakness and fresh concerns over artificial intelligence reshaping the outsourcing model. By early afternoon, Infosys had dropped more than 8%, TCS 7%, HCL Tech and Tech Mahindra 6%, while Wipro slipped nearly 5%.

Global Tech Sell-Off Sets the Tone

The decline followed overnight weakness in the Nasdaq, where technology and software stocks corrected heavily. The trigger was Anthropic’s unveiling of advanced AI tools capable of performing routine tasks such as document reviews and data analysis—functions traditionally outsourced to Indian IT service providers. Investors worried that automation could erode demand for low-level outsourcing, sparking a wave of selling across global IT counters.

American Depository Receipts (ADRs) of Infosys and Wipro also fell sharply in US trading, signaling trouble for domestic markets. When Indian exchanges opened, sentiment was already weak, and selling pressure quickly spread across the sector.

Valuation Concerns and Margin Pressures

Indian IT stocks had been trading at elevated valuations despite sluggish contract growth and cautious client spending in the US and Europe. The sudden global shock prompted investors to reassess risks. Concerns about how quickly companies can adapt AI into back-end processes added to the uncertainty. A stronger rupee further dented margin expectations for firms billing in dollars, compounding the pressure.

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Broader Market Impact

Mid-cap IT stocks were not spared, falling between 4–7% as stop-loss triggers accelerated the decline. The Nifty IT index emerged as one of the worst performers of the day. Analysts noted that the sell-off was largely sentiment-driven, exposing fragile confidence in the traditional outsourcing model.

Outlook for the Sector

The sector is expected to remain volatile in the near term as investors seek clarity on three fronts: the pace of global technology spending, the speed at which AI transforms enterprise workflows, and whether Indian IT firms can sustain deal momentum.

Despite the immediate shock, industry experts emphasize that this is not the end of the Indian IT growth story. Companies continue to invest in cloud, automation, and AI-powered services. The challenge now lies in reassuring markets that long-term prospects remain intact, even as short-term volatility persists.

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