Shares of Indian software exporters fell sharply on Thursday, extending losses for the week, as mounting concerns over artificial intelligence-led disruption and diminishing expectations of a near-term U.S. Federal Reserve rate cut dampened investor sentiment.
The Nifty IT index slipped to a four-month low, with heavyweights Tata Consultancy Services, Infosys and HCLTech declining between 3.7 per cent and 4.4 per cent. The 10-stock sub-index was the worst-performing sector both on the day and year to date. After dropping 12.6 per cent in 2025, it has already fallen 11.4 per cent so far in 2026.
Global technology stocks have come under pressure following the launch of Anthropic’s new Claude Cowork AI tool, backed by Amazon and Google, which aims to automate tasks across legal, sales, marketing and data analysis functions. The development has heightened fears that labour-intensive IT services, a core business model for many Indian firms, could face structural disruption as automation gains traction.
Indian IT companies, which rely heavily on deploying large workforces to execute client projects, were particularly affected by these concerns. Analysts said growing adoption of advanced AI tools is prompting investors to reassess long-term demand for traditional outsourcing services.
Adding to the pressure, hopes of an imminent interest-rate cut in the United States faded after stronger-than-expected labour market data. January job growth accelerated and the unemployment rate declined, giving the Federal Reserve more room to keep policy rates unchanged for longer. Higher-for-longer rates tend to weigh on technology spending outlooks, as many clients delay discretionary IT investments.
“The sharp dip in the ADRs of top Indian IT companies in the US yesterday, indicates that Indian IT will continue to struggle. The switch from IT to other segments will help performing stocks in performing sectors,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
The fact that FIIs were buyers in six of the last seven trading sessions, indicates that at least the trend of sustained selling is over. In the near-term the market is likely to consolidate around the current levels with an upward bias, he added.
Rate cuts are widely viewed as a potential catalyst for reviving technology budgets that have remained subdued in recent quarters. The absence of that trigger has further weakened sentiment towards export-oriented IT firms, which derive a significant portion of their revenue from the U.S. market.
Anthropic also unveiled an upgraded version of its Claude artificial intelligence model, capable of handling tasks for longer durations with improved reliability and enhanced capabilities in coding and finance. The announcement intensified concerns that automation tools could gradually replace routine tasks traditionally handled by IT service providers.
Indian IT stocks have declined around 13 per cent since the sell-off began on February 4, with Tata Consultancy Services slipping from being India’s fourth-most valuable listed company to the sixth position by market capitalisation.
The weakness in the IT sector also dragged broader markets lower, with the Nifty 50 falling 0.4 per cent and the BSE Sensex shedding 0.44 per cent during the session. |
