Indian IT Stocks Extend Sell-Off for Fifth Straight Session

Market Update: The Nifty IT index plummeted 3.33% in early trade on Tuesday, as investor concerns over artificial intelligence (AI)-led disruption persisted. This marks the fifth consecutive day of sell-off in Indian IT stocks.

Key Losers:

• HCL Technologies shares fell 3.9% to Rs 1,370.
• Infosys dropped 3.5% to Rs 1,281.5.
• Tata Consultancy Services stock declined 3.1% to Rs 2,592.5.
• Tech Mahindra slipped 2.8% to Rs 1,400.
• Wipro was down 2.7% at Rs 200.2.
• LTIMindtree also traded lower, falling 2.4% to Rs 4,716.

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Market Analysis:

The sell-off in IT stocks is driven by heightened global anxiety around AI-driven automation, following recent claims by Anthropic on automating legacy software modernisation. This has intensified fears that AI could structurally alter the industry's business mix.

Brokerage Updates:

• Jefferies downgraded several IT stocks, warning that AI may shift the sector towards consulting and implementation work, increasing cyclicality and execution risks.
• CLSA struck a more measured tone, saying fears of AI-led disruption in Indian IT services appear overdone. The brokerage maintained selective preferences for stocks such as Infosys, Tech Mahindra, Coforge, and Persistent Systems, but cut target prices across the board.

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Valuation:

Despite year-to-date declines of up to 16%, several IT stocks still offer higher downside potential than upside. Brokerages have trimmed target prices across the sector by 28-33%.