Indian IT Stocks Witness Sharp Selloff Amid AI Disruption Fears and Rupee Strength
Indian information technology stocks experienced significant downward pressure on Wednesday, February 4, mirroring a broader selloff in global technology markets. The primary trigger for this decline was fresh developments surrounding artificial intelligence startup Anthropic, coupled with the strengthening of the Indian Rupee, which typically weighs on export-oriented IT companies.
Market Reaction and Major Decliners
The Nifty IT index plunged over 7% during the trading session, with all ten constituent stocks trading in negative territory. Among the major players, Infosys slipped nearly 9% to ₹1,510.10, marking its worst single-day loss since April 2023. Tata Consultancy Services (TCS) dropped over 7%, while other prominent names like Tech Mahindra, LTIMindtree, and Coforge also declined around 7% each. Additionally, Mphasis, Persistent Systems, HCL Technologies, and Wipro lost between 5-6% each, reflecting widespread investor concern.
Why Anthropic AI Spooked Global Tech Markets
The selloff was amplified by similar weakness on Wall Street, where AI heavyweights like Nvidia and Microsoft fell almost 3%, Alphabet declined 1.2%, and Amazon lost 1.8%. The Nasdaq Composite ended 1.43% lower at 23,255.19. The root cause of this global tech rout was news that Anthropic, the company behind the Claude family of AI models, had introduced plug-ins and extensions for its Claude Cowork agent. These new AI tools are capable of automating professional tasks in areas such as:
- Legal research and documentation
- Compliance and regulatory workflows
- Marketing analytics and data processing
- Professional services automation
These segments have traditionally been high-margin revenue sources for software firms and IT service providers. The announcement sparked fears that AI could erode the pricing power, long-term subscription models, and volume-based billing structures that many IT companies rely on for profitability.
Not All Gloom: Experts Highlight Silver Linings and Opportunities
Despite the sharp correction, some market experts have advised investors to look beyond the immediate suffering of large-cap IT stocks. Prasenjit Paul, Equity Research Analyst at Paul Asset & Fund Manager at 129 Wealth Fund, noted that this selloff validates a structural shift in the industry. He stated, "We strongly advise investors to look beyond the suffering giants and focus on specialized 'AI beneficiaries' to capture the next upcycle."
Paul views this rout as a bifurcation opportunity, suggesting that while generic service models relying on headcount are facing existential tests, specialized IT firms serving niche verticals like healthcare and global OEMs could benefit. By deploying agentic AI to decouple revenue from manpower costs, these niche players are poised for significant margin expansion and valuation re-rating.
ICICI Securities also offered a nuanced perspective, highlighting that the recently concluded trade deal with the United States offers some positive benefits for the sector. While IT services and software exports are not directly tariff-linked, improved trade relations with the US—which contributes over 60% of revenues for Indian IT—signal stronger strategic alignment and easing geopolitical overhang. This could encourage US enterprises to advance discretionary tech spending and Global Capability Center (GCC) expansion, even if immediate revenue or margin acceleration is unlikely.
Sentiment-Driven Selloff: More Fear Than Fundamental Impact
As the IT selloff intensified through the trading session, market experts believe the sharp reaction is being driven more by fear of disruption than by any measurable impact on existing order books or earnings visibility. Pranay Aggarwal, Director and CEO of Stoxkart, commented, "While fears of disruption to outsourcing revenues have led to aggressive selling, this may reflect short-term anxiety rather than structural long-term damage. AI presents challenges but also expands opportunities for implementation, oversight, and higher-value services."
Aggarwal emphasized that Indian IT companies are already integrating AI into their offerings, which could allow them to move up the value chain rather than lose relevance. The present correction, therefore, seems more like an overreaction to immediate developments than a sign of irreversible impact.
Key Takeaways for Investors
The key takeaway for investors, according to experts, is to differentiate between volume-based IT models and specialized firms that can effectively integrate AI into their offerings. While the sector faces headwinds from AI automation and currency fluctuations, opportunities exist for companies that can adapt and leverage technology to enhance their service portfolios.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
