Domestic information technology (IT) stocks had a difficult session on Tuesday, with Infosys, Tata Consultancy Services (TCS), HCLTech, Tech Mahindra and Wipro all sliding sharply. Infosys fell more than 8% at one stage, TCS dropped over 7%, and the rest of the pack followed.
The selling pressure began well before domestic markets opened. Overnight in the United States, tech stocks weakened after leading artificial intelligence (AI) firm Anthropic announced new tools capable of performing tasks such as document review, data handling and analytical processing.
These are the types of routine, large-volume processes that global companies have traditionally outsourced to Indian IT service providers, and the announcement raised concerns about how quickly AI could displace parts of that work.
The first signs of trouble appeared in US trading, where the American Depositary Receipts (ADRs) of Infosys and Wipro fell sharply. ADRs are US-listed instruments that represent shares of foreign companies, and when they decline overnight, Indian markets usually follow.
By the time domestic trading began, sentiment had already turned negative.
IS THE MARKET REACTION JUSTIFIED?
Pranay Aggarwal, Director and CEO of Stoxkart, believes the market response is exaggerated. He points to “a mix of weak global tech sentiment and domestic macro pressures”, including the stronger rupee, which reduces the margins of companies that earn in US dollars but incur costs in rupees.
He notes that valuations across the IT sector were already elevated, and client spending in the US and Europe has been cautious for several quarters.
The Anthropic development, in his view, acted more as a trigger than a fundamental shift.
Aggarwal argues that Indian IT is entering a phase of transformation rather than decline. Automation will challenge the labour-heavy delivery model, but it also pushes companies toward higher-value segments such as AI-led services, cloud, cybersecurity and consulting.
He points out that firms are already seeing growth in AI-related engagements, with smaller pilot projects expanding into larger, multi-year deals. Industry projections still indicate growth of about 6-7% in the coming years, provided the sector continues to upskill and adapt.
In his assessment, the sell-off “looks more sentiment-driven than structural”.
Investors appear to be reacting to the headline risk around AI rather than the broader reality that Indian IT firms are actively investing in these technologies and preparing for a shift in the kind of work they deliver.
For investors, today’s fall is a reminder that the industry will need to evolve quickly. But it does not amount to a verdict on the sector’s long-term future.
