Indian Stock Markets Open Lower Amid AI Disruption Fears and Tech Sell-Off
Following significant declines at the close of the previous week, India's benchmark equity indices, the Nifty50 and BSE Sensex, commenced trading on Monday in negative territory. The Nifty50 opened below the 25,450 mark, while the BSE Sensex experienced a drop exceeding 100 points during the initial trading session.
At precisely 9:16 AM, the Nifty50 was recorded at 25,434.35, reflecting a decline of 37 points or 0.14 percent. Concurrently, the BSE Sensex stood at 82,520.90, down by 106 points or 0.13 percent. This downward movement extends the bearish trend observed last week, where both major indices closed in the red, slipping approximately 1 percent.
Underlying Causes of Market Weakness
The primary drivers behind this market correction are mounting concerns over artificial intelligence-led disruption and substantial selling pressure within the technology sector, which collectively dampened investor sentiment. Market analysts highlight that technology shares are currently undergoing a significant repricing phase, with persistent uncertainty surrounding AI's potential to disrupt established business models.
In light of these conditions, financial experts are recommending that investors adopt a selective and risk-managed investment approach. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, provided detailed commentary on the situation.
"The IT sell-off witnessed last week is expected to continue exerting pressure on the markets in the near-term," stated Dr. Vijayakumar. "The mild recovery observed in IT American Depositary Receipts (ADRs) on Friday is unlikely to provide substantial support to domestic IT stocks. Institutional investors are anticipated to persist in selling IT holdings and reallocating capital to sectors demonstrating robust earnings growth visibility, such as financials, automobiles, capital goods, telecom, and pharmaceuticals."
Global and Geopolitical Factors
Dr. Vijayakumar also pointed to external factors influencing market dynamics. "Brent crude oil prices are delicately balanced at approximately $68 per barrel, primarily due to concerns surrounding geopolitical tensions between the United States and Iran. This situation requires close monitoring," he added.
Regarding investment strategy amid current volatility, he advised, "Investors can utilize the present market fluctuations to churn their portfolios, favoring growth-oriented sectors like those previously mentioned. Overall, market prospects for 2026 appear favorable, as fundamentals are improving and valuations have adjusted to more reasonable levels in alignment with long-term averages."
He further noted that mid-cap and small-cap stocks, despite being relatively overvalued, are reporting earnings that surpass expectations.
International Market Context
In the United States, the S&P 500 index concluded Friday's session marginally higher after inflation data indicated a easing of price pressures. However, the Nasdaq Composite finished lower, as major technology and communication services stocks declined. This decline was fueled by ongoing apprehensions regarding the potential impact of artificial intelligence on existing corporate business models.
Asian markets traded within a narrow range, oscillating between modest gains and losses. Softer U.S. inflation figures bolstered expectations that the Federal Reserve might implement interest rate cuts later in the year. This development helped stabilize market sentiment following recent volatility linked to fears of AI-related disruption.
Investor Activity Analysis
Data from Indian exchanges revealed contrasting behaviors between foreign and domestic institutional investors. Foreign Portfolio Investors (FPIs) remained net sellers, offloading equities worth Rs 7,395 crore on Friday. In contrast, Domestic Institutional Investors (DIIs) were net buyers, purchasing shares valued at Rs 5,554 crore.
Disclaimer: The recommendations, views on the stock market, other asset classes, or personal finance management tips provided by experts are their own. These opinions do not represent the views of The Times of India or its affiliates.
