IT Stocks Fall Up to 8%: Market Faces Sharp Correction After AI Developments

The Indian IT sector witnessed a significant sell-off on February 4, with shares of top technology companies tumbling sharply. This sudden drop came in the wake of global AI developments, sparking renewed concerns about rising competition in the software and IT services space.

Market Performance: Nifty IT Index Suffers Worst Day Since 2020

The Nifty IT index fell more than 7% on February 4, marking its steepest decline since March 2020.

• Infosys and LTI Mindtree shares dropped over 8% each.
• Coforge shares slipped nearly 8%.
• Persistent Systems, Mphasis, and TCS fell around 7% each.
• Tech Mahindra and HCL Technologies declined roughly 6%.
• Wipro shares were down almost 5%.

The sharp correction erased nearly ₹2 lakh crore from the total market capitalization of India’s leading IT companies.

Why IT Stocks Plummeted?

The sell-off was closely linked to international developments, as US markets also experienced sharp declines. Investors reacted to the launch of a new AI tool by Anthropic, which added automation capabilities for legal, sales, marketing, and data analysis tasks.

Key triggers included:

• Introduction of Claude Cowork AI tool by Anthropic, capable of automating complex workflows.
• Concerns over AI-driven competition potentially impacting traditional IT services.
• Rising uncertainty over profitability and billing models in service-heavy IT companies.

These developments highlighted a potential shift in how enterprise services may be delivered, increasing near-term volatility in IT stock prices.

Company-Wise Impact

The correction affected major Indian IT firms, with the largest drops recorded in the top-tier companies:

The sell-off has highlighted the growing role of AI and how it could reshape traditional IT services, particularly in areas that depend heavily on manual, labor-intensive work.

The Story Behind the Numbers

The decline is not just about stock prices—it reflects broader structural changes in the IT landscape. AI tools like Anthropic’s Claude are starting to automate tasks that were previously human-led, compressing timelines and reducing reliance on large teams for enterprise workflows.

While this has rattled markets, it also points to a transition in enterprise operations, moving toward faster, more efficient, and scalable solutions. Companies that adapt to these changes could see long-term operational benefits, even as short-term market sentiment remains cautious.

Summary

The Indian IT sector experienced a sharp correction, with the Nifty IT index dropping over 7% on February 4. The sell-off was largely triggered by global AI developments, particularly Anthropic’s launch of a legal AI tool that automates complex workflows.

• Shares of Infosys, LTI Mindtree, Coforge, and other major IT firms fell between 5% and 8%.
• Total market capitalization of top IT companies declined by ₹2 lakh crore.
• The correction reflects structural shifts in enterprise services rather than immediate fundamental weaknesses.

As AI continues to influence IT operations, the sector faces near-term volatility, with market reactions driven more by sentiment than by immediate financial performance.

Source: Moneycontrol