- Shares of Indian IT companies fell sharply in early trade on Thursday
- Coforge Ltd. and Infosys Ltd. dropped 4% after the market opened
- Tech Mahindra Ltd., TCS Ltd., and LTIMindtree Ltd. declined over 3%
Shares of all Indian information technology companies tanked during early trade on Thursday amid sustained concerns over disruption from artificial intelligence. Coforge Ltd. and Infosys Ltd. fell 4% after opening bell, while Tech Mahindra Ltd., Tata Consultancy Services Ltd., and LTIMindtree Ltd. tanked over 3%.
The Nifty IT index representing 10 major companies fell over 4%, bringing its year-to-date losses at 12%.
Nifty IT Index Enters Bear Market
| Crisis | Fall (%) |
|---|---|
| Dot-Com Crisis | -83 |
| 2008 Global Financial Crisis | -55 |
| 2020 Covid-19 Crisis | -20 |
| 2022 Fall – Geo-Political Crisis | -31 |
| Current Fall – Trump and AI | -23 |
New tools from AI companies like Anthropic have ignited fresh concerns over the growth prospects of legacy software and consulting companies that rely on a large pool of staff to deliver tech solutions. In China, ByteDance Ltd. and Zhipu have joined a flurry of companies releasing major AI model upgrades, raising the stakes in an intensifying battle for tech dominance and users.
However, the current selloff does not reflect the immediate earnings impact for these companies, Sandip Agarwal, fund manager and co-founder of Sowilo Investment, told NDTV Profit.
"I don't think revenue or profit will go down as sharply as share prices. Every year, 20% of the contracts come up for renewal and that may hit a hit due to AI. Companies may lose 4-5% revenue growth every year for the next couple of years. Hence growth for large caps in the next 3-4 years will be muted at mid single-digit," he said.
Agarwal said IT companies should now be gauged using price/earnings to growth (PEG) ratio rather than PE. The PEG ratio has been very high for the sector for years, which was unsustainable given the level of AI disruption, he said.
Follow stock market live updates.
'Overreaction'
Mahindra Group Chief Executive Officer Anish Shah told NDTV Profit's Niraj Shah the recent IT selloff is an "overreaction". When asked about advances in AI tools by Anthropic, "We have known what the benefits of AI are. It does bring in a high level of productivity and we have adapted to that."
Notably, group company Tech Mahindra stock has sunk 10% so far this month, wiping off Rs 1.8 lakh crore in market capitalisation. This happened after Anthropic's release of 11 open-source plugins for Claude Cowork, which create “digital employees” for functions in legal, finance, sales, and customer support, raising concerns about the future of traditional staffing and billing models in the tech sector.
Shah said he sees a "lot of opportunities opening up" for IT services companies from the rapid advancement of AI and dismissed the apocalyptic predictions for the sector.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.