India’s IT stocks head for worst day in 4 months on AI disruption worries; TCS plunges 9%
FILE PHOTO: Brokers trade at their desks inside a stock brokerage firm in Mumbai, India, August 28, 2025. REUTERS/Francis Mascarenhas/File Photo
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June 3 : India’s information technology stocks were headed for their worst day in four months on Wednesday as renewed concerns that artificial intelligence could disrupt traditional software services rattled investors.
The IT index was down 5.8 per cent at 29,310.25 points. If losses hold, this would be its worst day since February 4.
Tata Consultancy Services, India’s largest software exporter, slumped 9 per cent to lead the losses, while Bengaluru-based Infosys and Wipro dropped 4.3 per cent and 3.7 per cent, respectively.
Among mid-tier firms, Coforge and Persistent Systems shed 5.7 per cent each.
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The losses mark a sharp reversal from the sub-index’s 7 per cent gains seen over the last two sessions when investors bought beaten down IT stocks and bet that increasing AI spending could boost demand for IT services.
India’s $300 billion IT sector has been under pressure for much of this year as investors assess whether AI will generate new revenue streams for software exporters or reduce demand for traditional outsourcing services.
“We expect new opportunities such as legacy modernization to increase, but do not expect them to compensate for the deflation enough,” said Kotak Institutional Equities analysts led by Kawaljeet Saluja.
A surge in AI investments and AI tools from Anthropic has rattled software stocks globally this year. India’s Nifty IT index is down 22 per cent in 2026, after plunging 26 per cent in 2025.
Ambit Capital said fourth-quarter IT earnings confirmed the ongoing challenges that the sector is facing.
“While we see a role for IT services in enterprise AI implementation, building guardrails/governance and vertical solutions, we believe deflation will exceed incremental demand,” the brokerage said.
Rishubh Vasa, a research analyst at Indsec Securities and Finance, said the total addressable market of domestic IT companies could shrink 20 per cent-25 per cent.
Source: Reuters
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