Nifty IT slumps 17% in a month: Is AI a threat to IT stocks or a fresh buying opportunity? Experts explain

Concerns over Artificial Intelligence have triggered volatility in Indian IT stocks over the past week after fresh developments by US-based AI firm Anthropic intensified fears of disruption in the global technology services space.

Shares of several Indian IT companies declined sharply amid worries that advanced AI tools could impact traditional outsourcing and coding-led revenue models. Investors fear automation may reduce billing hours, slow hiring and pressure growth.

The Nifty IT index was trading at 32,473.70, down 207.80 points or 0.64 per cent, on Monday. The index has declined 8.82 per cent over the past week and fallen 16.92 per cent in the last month. Over the past three months, it has been down 10.54 per cent, while it has slipped 6.77 per cent in six months. On a year-to-date basis, the index has dropped 14.93 per cent and is down 21.39 per cent over the past year.

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In a special discussion, Zee Business Managing Editor, Anil Singhvi, spoke with industry leaders, including Shashank Desai, Founder and CEO of Mestek and former Chairman of NASSCOM, investor Gurmeet Chadha, Founder of Complete Circle Wealth, and Shashank Thakur of CoreoVer AI.

Industry Has Faced Disruptions Before

Desai said fears around AI must be viewed in a historical context. “Forty years ago, the Indian IT industry was about 50 million dollars in revenue. Today, it is nearly 250 billion dollars. The industry has grown 5,000 times and has seen many technology shifts,” he said.

He added that the sector has successfully adapted to client-server systems, Y2K, BPO, digital transformation and cloud computing. "Indian companies have learned how to convert technological revolutions into opportunities. This should not be discounted,” he said.

On AI-led efficiency, Desai said, “Coding efficiency will improve, but coding is not 100 per cent of IT services work. Before coding and after coding, many processes require human intervention.”

He said cost reduction from AI could increase demand. “When costs fall, demand rises. New applications will emerge that we may not even be able to imagine today,” he said.

Desai also cautioned on heavy investments in the AI ecosystem. “There is a speed mismatch. Investments are happening quickly, but returns may take time. Large companies can afford to wait. Smaller firms may face challenges,” he said.

He added that AI adoption is currently higher at the individual level than at the enterprise level due to data security and change management concerns. “Markets are reacting more to the negative side in the short term. The positive benefits will take time to show,” he said.

Market Reaction and Structural Shift

Chadha said markets tend to react sharply during disruption cycles. “Markets act at extremes. When there is good news, they overreact. When there is disruption, they overreact on the downside as well,” he said.

He noted that IT revenue growth has remained in low single digits in recent years. “If growth remains flat, investors question valuation multiples. That is where some of the fear is coming from,” he said.

On job roles, Chadha said, “Basic coding and repetitive Level 1 and Level 2 tasks may see some impact. The traditional pyramid structure in IT services could get challenged.”

However, he added that enterprise systems are complex and cannot be replaced immediately. “We should not write off Indian IT. Companies have cash, talent and experience of handling disruption. Some will adapt faster than others,” he said.

He also pointed to broader concerns. “IT is a mass hirer. If hiring slows, there could be second-order effects on consumption and real estate. Markets are factoring in those risks as well,” he said.

Despite near-term uncertainty, Chadha maintained a constructive long-term view. “When everyone turns negative on a time-tested sector, opportunities can emerge. But this is not yet a table-thumping buying moment,” he said.

AI as Job Transformer, Not Destroyer

Thakur said AI tools should be viewed as enablers rather than threats. “Earlier AI tools were chatbots and assistants. Now they are more advanced and can manage workflows. But this does not mean jobs will disappear,” he said.

He added that repetitive tasks such as routine coding, documentation and data extraction can be automated. “This will allow professionals to focus on complex problem-solving, design thinking and strategy,” he said.

On concerns around accuracy, Thakur said, “AI is only as good as the data behind it. Accuracy levels are high, but there can be some deviations. Governance and data security remain important.”

He added that India remains well-positioned. “India has strong STEM talent, scale and enterprise demand. If we adopt and reskill fast, this can be a win-win situation,” he said.

Short-Term Volatility, Long-Term Opportunity

Experts agreed that AI represents a structural change in how technology services will be delivered. In the near term, uncertainty around revenue models, hiring patterns and margins may keep IT stocks under pressure.

However, panellists said AI is more likely to transform roles rather than eliminate the industry. Reskilling and value migration will be critical.

As Singhvi concluded during the discussion, the focus should be on identifying opportunities rather than reacting to fear. According to the experts, AI brings challenges, but it also opens new avenues for innovation and growth in the Indian IT sector.