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India IT stocks set to lose $50 billion in worst week since pandemic on AI fears
However, JPMorgan says it’s “overly simplistic” to assume that AI can generate enterprise software and replace the value IT firms create across the cycle.
India's IT stocks, led by Tata Consultancy Services Ltd. and Infosys Ltd., are set to lose about $50 billion in market capitalisation for their worst week since March 2020, as AI threatens to upend their business model.
The Nifty IT index fell as much as 5.2% on Friday before paring losses to roughly 1.7% by 1:00 pm. For the week, the index is down 9.4%, its steepest drop since early March 2020 when Covid-19 gripped global markets. The benchmarks BSE Sensex and Nifty are down nearly 1.2% each.
The sell-off followed a similar rout on Wall Street overnight.
“The sell-off in AI stocks in US markets was expected but the timing and extent of was not known,” V.K. Vijayakumar told HT Business in an emailed statement. “The 2.04% decline in NASDAQ is not a crash. But if the downtrend continues, it might pull the US market down.”
“For the Indian market, this correction in AI stocks is a positive, because last year’s global rally was primarily an AI trade in which India, an AI laggard, couldn’t participate. So the unwinding of the AI trade, If it persists, is a positive from the Indian perspective.”
A bigger concern, however, is the convulsions in Indian IT stocks — the second-largest profit pool for India Inc. But Geojit's Vijayakumar warns against panic selling.
“The real impact of the ‘Anthropic shock’ on the IT sector is yet to be ascertained,” he said. “Panic selling in IT stocks at this stage may not be a good idea. Investors may wait and watch for the dust to settle.”
Anthropic shock for Indian IT
In early February 2026, Anthropic triggered a "SaaSpocalypse" with the launch of Claude Cowork, an agentic AI suite. Unlike previous chatbots, this tool features specialised plugins designed to autonomously execute end-to-end workflows in legal, finance, and sales—tasks that form the backbone of Indian outsourcing.
The revelation that AI can now manage complex multi-step processes panicked IT investors as the tool threatens the traditional “headcount-based” billing model of TCS, Infosys, Wipro and their ilk.
The sell-off which ensued has only intensified since then.
AI is a friend of IT?
Analysts at JP Morgan flagged investor concerns that India's IT firms could miss growth targets as AI pushes clients to reallocate spending.
The brokerage, however, noted that it’s “overly simplistic” to assume that AI can automatically generate enterprise grade software and replace the value IT services firms create across the cycle.
“IT services companies remain the plumbers in the tech world, and if enterprise software/SaaS is rewritten on a bespoke basis by agents — it will need significant services plumbing to work in enterprise context and minimise AI slop.”
