Indian equity markets extended their decline for a second straight session on Friday, with information technology (IT) stocks at the centre of the sell-off. TheBSE Sensexfell more than 700 points in early trade, while theNifty 50slipped below the 25,600 mark, reflecting persistent weakness in frontline counters.
The decline was driven by heavy selling in large-cap technology majors such asInfosysandTata Consultancy Services, along with other leading IT names. The sector has become the epicentre of the ongoing correction as investors react to volatility in US technology stocks and reassess the implications of artificial intelligence-led disruption.
Indian IT companies derive a significant share of their revenues from US clients, making them highly sensitive to movements in global technology stocks and American corporate spending trends. Weakness in US markets has therefore spilled over to Dalal Street, intensifying pressure on domestic benchmarks.
The recent 2.04% decline in theNasdaq Compositetriggered fresh concerns about the sustainability of the global AI-driven rally. Market experts believe that while the sell-off in AI-linked stocks was anticipated, its timing and magnitude have unsettled investors.
Dr VK Vijayakumar, Chief Investment Strategist atGeojit Investments Limited, described the current phase as turbulent. He noted that although the Nasdaq’s fall does not amount to a crash, a continued downtrend in US markets could drag sentiment further.
According to him, the global unwinding of the AI trade may ultimately benefit India, as last year’s rally was largely concentrated in AI-focused stocks where India had limited participation. However, the immediate concern remains the sharp correction in IT stocks — the second-largest profit pool of India Inc.
Markets are also grappling with what some analysts describe as the “Anthropic shock” — rapid advancements in generative AI technologies that may accelerate structural disruption in IT services.
Traditional outsourcing models, based on manpower billing, are being challenged by automation in coding, testing, documentation, and maintenance. While AI adoption could improve efficiency and margins, it also raises questions about revenue growth and billing models.
Dr Vijayakumar cautioned against panic selling at this stage, stating that the real earnings impact of AI disruption is yet to be fully understood. Investors, he suggested, may benefit from waiting for greater clarity.
Despite the turbulence, experts see selective opportunities emerging. High-quality growth stocks with strong Q3 results may offer accumulation opportunities during market dips. The auto sector, in particular, is expected to remain relatively resilient due to solid earnings performance and favourable growth prospects.
For now, IT stocks remain the swing factor for the broader market. Whether the correction deepens or stabilises will depend largely on the trajectory of US technology stocks and how investors interpret the evolving AI narrative.
Until clearer signals emerge from global markets and corporate earnings guidance, volatility on Dalal Street is likely to persist.
