Significant Decline in India's IT Sector Amid AI Disruption Fears
Dramatic Drop in IT Sector Performance
The Indian IT industry has experienced its most significant monthly decline in almost 17 years, primarily due to rising concerns over AI disruptions following the introduction of new tools by Anthropic. In February, the Nifty IT index plummeted by 19.5%, marking its worst monthly performance since the financial crisis of 2008. The index saw a downturn in 12 out of 21 trading days, resulting in a staggering loss of nearly ₹5.7 lakh crore in market capitalization throughout the month.
AI Tools Ignite Investor Concerns
The sell-off was exacerbated by the launch of Claude Cowork and Claude Code by the US-based AI company Anthropic, which are perceived to have the potential to automate significant aspects of software development and enterprise workflows. Investors reacted swiftly, fearing that advancements in generative AI could undermine traditional revenue models in IT services, particularly in outsourcing, application development, and maintenance contracts—key income sources for major Indian tech firms.
Impact on Stock Prices
- Coforge experienced a dramatic drop of 28%, making it the worst performer.
- LTIMindtree, Tech Mahindra, Persistent Systems, and Infosys saw declines ranging from 21% to 28%.
- TCS, HCL Technologies, and Mphasis fell between 15% and 18%.
- Oracle Financial Services was the least affected, with a decrease of 10.7%.
- Wipro faced relatively minor losses.
While the broader Nifty index only fell by 0.6% during the month, the IT sector faced disproportionate pressure.
Comparisons to the 2008 Crisis
The magnitude of this correction echoes the 2008 crisis, which was triggered by a global demand shock affecting the tech sector. However, the current catalyst is structural, stemming from the rapid advancement of AI capabilities rather than a macroeconomic downturn. Markets are now reevaluating the extent to which AI could transform cost structures, pricing strategies, and employment trends within India's IT sector. February's downturn serves as a clear indication that Anthropic's AI initiatives have shifted from theoretical disruption to a tangible market force impacting Indian tech stocks.