A statue of a bull is displayed at the Bombay Stock Exchange (BSE) building in Mumbai, India, on Monday, March 9, 2020. Photographer: Dhiraj Singh/Bloomberg
BENGALURU: Indian software exporters plunged another 2% on Friday and looked set to end a tumultuous week that has seen $22.5 billion in market value losses on growing fears that new AI tools could severely disrupt the country's IT outsourcing industry.
The selloff was part of a global rout in software and data services stocks, triggered by the launch of an AI tool from Anthropic that automates tasks across legal, sales, marketing and data analysis functions.
The IT index was the worst-performing sector on the day and was down about 7% for the week - its steepest weekly drop in more than four months.
Analysts said fast-advancing AI tools could upend India's $283-billion IT sector, which is heavily reliant on a labour-intensive delivery model.
"The market fears (the AI tools) may replace IT services that are currently outsourced. What the real impact will be remains to be seen," said VK Vijayakumar, chief investment strategist at Geojit Investments.
The selloff comes as some IT firms have said they are gaining from clients showing more willingness to fund AI projects despite being careful about discretionary spending amid global economic uncertainty.
Top IT firms TCS, Infosys and Wipro have secured AI-led deals and are rolling out domain-specific platforms across verticals such as BFSI and healthcare as clients accelerate adoption.
Still, the IT index has now shed nearly 18% since the start of 2025, including Wednesday's selloff, when it logged its biggest single-day fall in six years. Foreign investors sold a record $8.5 billion worth of Indian IT stocks in 2025.
KNEE-JERK REACTION, SAY SOME ANALYSTS
Industry watchers were divided on their assessment of the situation.
Centrum Broking's Piyush Pandey called the selloff a "knee-jerk" reaction.
"AI tools have been in the works and this is how the industry is now shaping up. However, they are not expected to materially disrupt the industry as of now," he said.
Others said the sector should brace for more pain down the road.
"Surely, there would be other tools in the making that will automate tasks and increase the competitive intensity in the IT industry," said Arun Malhotra, fund manager at CapGrow Capital.
Companies will likely take measures to address these challenges, including acquisitions, he added, but "we don't foresee the glory days of the IT sector, that has been missing for the last couple of years, returning soon."
All 10 constituents of the IT sub-index traded lower on Friday. Coforge was down 3.4%, while TCS and Infosys slipped nearly 2.1% and 1.4%, respectively.
The benchmark Nifty 50 was down 0.3%. ($1 = 90.2350 Indian rupees) - Bernama
