Mumbai’s stock market witnessed a brutal sell-off in the IT sector on Thursday, with the Nifty IT index plummeting 5.51% to its lowest level in four months. Investors are reeling from concerns over artificial intelligence (AI) disrupting traditional services and fading hopes for quick U.S. interest rate cuts.
The combined market capitalization of Nifty IT companies shrank dramatically to ₹27,32,579 crore, erasing nearly ₹1.6 lakh crore in value. Major software giants bore the brunt: TCS shares tumbled 5.48% to a 52-week low of ₹2,750, while Infosys dropped by the same margin. Tech Mahindra fell 6.40%, and HCL Tech, Mphasis, and Wipro saw declines ranging from 4.5% to 5%.
Market experts point to advanced AI technologies as the primary culprit. Traditional IT services, which form the backbone of Indian firms’ revenues, face existential threats from tools like Anthropic’s newly launched ‘Claude Cowork,’ capable of autonomously handling complex business tasks.
This AI system integrates automation tools that manage multi-step processes seamlessly, potentially obsoleting the need for fragmented software solutions. International brokerage Jefferies has dubbed this phenomenon ‘SaaS-pocalypse,’ warning that AI could supplant conventional software providers entirely.
Some analysts predict revenue hits of up to 40% if AI fully replaces legacy services. Compounding the woes, robust U.S. jobs data—133,000 new positions added last month and unemployment dipping to 4.3%—dashed expectations of imminent Federal Reserve rate reductions, piling pressure on IT stocks.
Brokerage firm Motilal Oswal echoes these sentiments, noting that emerging AI could diminish demand for outdated software and testing services. As the sector grapples with these headwinds, investors remain cautious, eyeing how Indian IT bellwethers adapt to this technological tsunami.