Indian information technology shares moved decisively lower on Friday, mirroring a broader drop in global technology equities as investors grappled with renewed concerns over the disruption potential of generative artificial intelligence and withering sentiment following losses in U.S. markets.
Market moves - The Nifty IT index fell by more than 5%, sliding to a month low. For the week, the IT sub-index was on track to fall by over 11%.
Individual stocks - Among the large-cap IT services names, Tata Consultancy Services (NSE:TCS) declined by about 5% on Friday after having fallen nearly 6% in the previous session. Infosys (NSE:INFY) dropped nearly 7% following a 6% decline on Thursday. HCL Technologies (NSE:HCLT), Wipro Ltd (NSE:WIPR) and Tech Mahindra (NSE:TEML) each slid in a range of roughly 4% to 6% on Friday.
Drivers of the sell-off - Market participants pointed to a resurgence of concern that rapid improvements in generative AI tools could undermine demand for traditional, labour-intensive outsourcing contracts that are a key revenue source for many Indian IT firms. Investors highlighted the rollout of progressively more capable AI agents by global technology companies. These agents are seen as having the ability to automate tasks such as coding, customer support and back-office functions, which could alter the service mix and labour requirements for outsourcing providers.
Wider market context - Sentiment was further pressured by overnight declines on Wall Street. In addition, persistent strength in U.S. economic data has dampened expectations for near-term Federal Reserve rate cuts, a development that has applied additional pressure on growth-oriented technology stocks around the world.
The combination of technological disruption concerns specific to the IT outsourcing model and broader macro-driven risk aversion in global technology markets contributed to the pronounced weakness seen in Indian IT names on Friday.
Summary of moves and drivers
- Nifty IT index fell more than 5%, reaching a one-month low and set to decline over 11% for the week.
- Major IT firms including TCS and Infosys reported multi-session falls, while HCL Technologies, Wipro and Tech Mahindra also posted declines.
- Renewed concerns about generative AI's ability to automate core outsourcing functions and weaker sentiment from U.S. market declines and reduced prospects for near-term Fed cuts were cited as key factors.