India's information technology stocks plunged Wednesday, heading for their worst day in four months as fears that artificial intelligence will disrupt traditional software services rattled investors.
The BSE IT index fell 5.8 percent, led by Tata Consultancy Services which slumped 9 percent. Infosys dropped 4.3 percent, Wipro lost 3.7 percent, and mid-tier firms Coforge and Persistent Systems each shed 5.7 percent.
The rout reverses gains from the past two sessions, when investors bought beaten-down stocks hoping rising AI spending would boost demand. Instead, concerns are mounting that AI will shrink the addressable market for India's $300 billion IT sector rather than create new revenue streams.
Analysts at Kotak Institutional Equities cautioned that while legacy modernization may increase, it won't compensate for deflation. Ambit Capital noted that fourth-quarter earnings confirmed ongoing sector challenges, and Indsec Securities forecast a 20-25 percent contraction in the total addressable market for domestic IT companies.