India Emerges as a Potential "Reverse AI Trade" According to Jefferies' Chris Wood

IT Stocks: India's "Reverse AI Trade" Gains Momentum

Key Developments:

• Infosys and Anthropic have announced a strategic tie-up to jointly develop custom AI agents for individual enterprises.
• This development reinforces the idea that corporates are moving towards small, purpose-built language models, rather than relying on large, generic AI platforms.

Market Performance:

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• The Nifty IT index slipped 1.2% in today's session, trading 2% above its 52-week low of 30,918.95.
• The decline marked the third consecutive day for the index, which has now fallen 4% over the past three sessions.
• The Nifty benchmark index advanced 0.6% during the session.

Long-Term Performance:

• The Nifty IT index has dropped 22% over the past one year, 14% in the last three months, and 17% in the past one month.
• All constituents of the Nifty IT index were trading in the red, with Coforge emerging as the top loser, sliding 2.5%, followed by LTI Mindtree, which fell 2%.

AI Adoption and its Implications:

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• According to Chris Wood of Jefferies, the shift towards custom AI agents positions Indian IT companies as enablers of AI adoption, rather than victims of it.
• Infosys disclosed that 90% of its top 200 large clients are already using its AI services, underlining that enterprise demand is actively building.
• This narrative challenges the assumption that Indian IT services are inevitable losers from AI, which has been a key reason for their underperformance.

Economic Implications:

• The IT services sector employs around 5.8 million people, making it a crucial pillar of India's white-collar employment base.
• While hiring momentum has slowed, the sector still added a net 126,000 jobs in FY25, compared with 445,000 jobs in FY22.
• The potential market opportunity for Infosys's "AI First" services strategy is estimated to be $300–400 billion by 2030.