India’s top information technology (IT) stocks have fallen sharply over the past month. Infosys’ share price is down around 18% from recent highs, while TCS has dropped about 14%. For companies that many investors consider steady and reliable, this decline has raised concern.
There has been a mild bounce in early trade today. Some investors are buying at lower levels. But the broader trend over the past few weeks has clearly been downward.
So what is going on?
DECODING THE IT MELTDOWN
There are two main reasons.
First, global uncertainty. Many large companies in the United States and Europe are being cautious about spending money on new technology projects. When companies delay or reduce tech spending, Indian IT firms receive fewer new contracts. That affects revenue growth expectations.
Second, artificial intelligence (AI) fears.
AI tools can now write code, analyse data and automate certain tasks. Investors are worried that if machines can do more of this work, companies may need fewer traditional IT services. This has created anxiety about whether the old business model will shrink.
When investors believe future growth may slow down, they reduce the price they are willing to pay for a stock. That is called a valuation reset. It does not mean the company is collapsing. It simply means the stock price adjusts to lower growth expectations.
IS THIS A STRUCTURAL PROBLEM?
Dhanshree Jadhav, Analyst – Technology at Choice Institutional Equities, says this correction is not the start of a crisis.
“The recent correction in large IT stocks such as Infosys and Tata Consultancy Services should be viewed as a valuation reset rather than the start of a broader downturn,” she says.
She explains that AI is unlikely to replace enterprise systems overnight. Enterprise systems are the complex technology platforms that large companies use to manage operations, data, compliance and security. These systems have been built over decades and cannot simply be replaced by a chatbot.
“AI remains a powerful, evolving tool that augments work and requires high-quality data, compliance, integration and human expertise,” she says.
In simple terms, AI helps people work faster. But it still needs trained professionals to connect it to existing systems, ensure it follows regulations and manage risks.
HOW ARE IT COMPANIES ADAPTING?
Indian IT companies historically operated on what is known as a labour arbitrage model. That means they used a large workforce in India to deliver services at lower costs compared to Western countries.
Now, that model is evolving.
“IT services are proactively shifting from their traditional labour arbitrage model to more IP-driven revenue streams and platform-based offerings led by AI,” Jadhav says.
IP-driven revenue means earning money from proprietary software or technology platforms, rather than only billing hours of human work. Platform-based offerings mean providing ready-made technology solutions that clients can subscribe to.
Infosys and TCS are building AI-focused products and infrastructure partnerships to stay relevant in this shift.
“With valuations now more rational, this correction offers a compelling long-term entry point as AI monetisation accelerates and demand conditions improve,” she adds.
AI monetisation simply means turning AI capabilities into real revenue.
SHOULD INVESTORS WORRY?
A bigger crash would likely require either a severe global economic slowdown or clear proof that IT companies are losing large volumes of business because of AI.
So far, that has not happened.
What markets are seeing now is uncertainty. Investors are adjusting expectations. That does not automatically mean the sector is broken.
For investors, the key is to watch whether companies continue winning contracts, protecting profit margins and adapting their business models.
The IT industry is changing. But change does not always mean decline. Sometimes it simply means evolution.
