Indian Stock Market Endures Turbulent Week as IT Selloff and AI Concerns Trigger Sharp Declines
The Indian stock market experienced a week of extreme volatility, with benchmark indices surrendering initial gains amid a significant selloff in information technology stocks. Over the course of the week, the Sensex plummeted by 953.64 points, equivalent to a 1.14% decline, while the Nifty registered a fall of 222.6 points, or 0.86%.
The overall market capitalization of companies listed on the Bombay Stock Exchange contracted sharply by Rs 7,02,017.71 crore, reducing the total valuation to Rs 4,65,46,643.20 crore ($5.13 trillion) as of Friday. According to PTI reports, investors have suffered losses amounting to Rs 9.5 lakh crore over the last two trading sessions alone.
Key Factors Behind the Market Nosedive
On Friday, both the BSE Sensex and NSE Nifty dropped by more than 1%, as widespread selling pressure—particularly in metal, information technology, and commodity shares—mirrored weakness across global markets. Domestic equity markets closed in negative territory after a sharply fluctuating trading session, pressured by subdued global signals as investors remained cautious ahead of upcoming US inflation data.
Market participants indicated that investor sentiment was further weighed down by a corporate earnings season that fell short of expectations, coupled with growing concerns that rapid advances in artificial intelligence could disrupt traditional business models in the technology sector.
Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services Ltd, noted that the benchmarks weakened primarily due to disappointing earnings outcomes and persistent pressure on technology stocks amid worries over AI-driven disruption. He highlighted that the Nifty IT index fell to a 10-month low during trading before closing 1.4% lower, with selective buying helping limit losses.
The sector continues to face challenges as concerns escalate that rapid developments in AI could affect established service models and cloud visibility on future revenue growth.
Vinod Nair, Head of Research at Geojit Investments Limited, observed that the optimism generated by the India-US trade agreement has weakened, while fresh concerns about AI-led disruption have dampened investor risk appetite. Markets are increasingly worried that Indian IT companies reliant on the labour arbitrage model could face stronger competitive challenges compared with their counterparts listed on Nasdaq.
He added that this cautious sentiment spread across the broader market, dragging all major indices lower, with most sectors ending the session in the red. Nair also noted that metal stocks witnessed profit-booking as the dollar index strengthened. Reports suggesting Russia’s return to settlements in US dollars increased expectations of possible easing of sanctions, raising concerns about softer realisations for metal producers.
Deep Cuts in IT Sector Stocks
India’s $250 billion software services sector is under intense pressure, with a relentless wave of selling erasing several lakh crore in market capitalisation over the past eight trading sessions. The losses have been broad-based and substantial.
- Over the eight-day rout, Infosys, Tata Consultancy Services, and HCL Technologies have dropped substantially.
- Wipro and Tech Mahindra have also seen steep declines.
- Shares of TCS have now slumped 44% from their record peak in August 2024, pulling the company’s market capitalisation below Rs 10 lakh crore—a level last observed in October 2020.
The immediate catalyst is the emergence of Anthropic’s Claude 4.6 and Cowork agents, developments that have intensified concerns about a potential structural shift in the industry. Some market watchers have dubbed the moment a “SaaSpocalypse,” reflecting fears that advances in AI could disrupt the traditional headcount-driven billing model on which much of the sector has long relied.
Market Outlook and Technical Analysis
From a technical standpoint, Rupak De, Senior Technical Analyst at LKP Securities, says that the setup has turned relatively cautious, with the index slipping below its 20-day moving average for the first time in the past few sessions. Additionally, it has breached the 38.2% Fibonacci retracement of the prior up move from 24,571 to 26,341.
“With the index closing below the key support level of 25,500, the near-term bias appears weak, and there is potential for a decline toward the 25,000 mark in the short term. On the upside, immediate resistance is seen around 25,800,” Rupak De stated.
Vinod Nair of Geojit Investments Limited is of the view that in the near term, with tariff-related concerns easing and the domestic earnings season drawing to a close on a mixed trend, market focus will hinge largely on global cues, including the US labour data and shifting expectations surrounding the US Fed’s policy path.
“However, the overall sentiment is likely to remain cautious as investors monitor global AI-driven disruptions and geopolitical risks while improved valuations and constructive GDP forecasts may help sustain FII inflows. With IT and metals facing persistent structural and external headwinds, market leadership may rotate toward domestically oriented sectors such as banking, autos, and select consumption-driven segments. However, broader indices are expected to remain range-bound until clearer macroeconomic and policy signals emerge,” he explained.
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