By Vivek Kumar M and Abhirami G
June 3 (Reuters) – India’s information technology stocks were headed for their worst day in four months on Wednesday as renewed concerns that artificial intelligence could disrupt traditional software services rattled investors.
The IT index was down 5.8% at 29,310.25 points. If losses hold, this would be its worst day since February 4.
Tata Consultancy Services, India’s largest software exporter, slumped 9% to lead the losses, while Bengaluru-based Infosys and Wipro dropped 4.3% and 3.7%, respectively.
Among mid-tier firms, Coforge and Persistent Systems shed 5.7% each.
The losses mark a sharp reversal from the sub-index’s 7% gains seen over the last two sessions when investors bought beaten down IT stocks and bet that increasing AI spending could boost demand for IT services.
India’s $300 billion IT sector has been under pressure for much of this year as investors assess whether AI will generate new revenue streams for software exporters or reduce demand for traditional outsourcing services.
“We expect new opportunities such as legacy modernization to increase, but do not expect them to compensate for the deflation enough,” said Kotak Institutional Equities analysts led by Kawaljeet Saluja.
A surge in AI investments and AI tools from Anthropic has rattled software stocks globally this year. India’s Nifty IT index is down 22% in 2026, after plunging 26% in 2025.
Ambit Capital said fourth-quarter IT earnings confirmed the ongoing challenges that the sector is facing.
“While we see a role for IT services in enterprise AI implementation, building guardrails/governance and vertical solutions, we believe deflation will exceed incremental demand,” the brokerage said.
Rishubh Vasa, a research analyst at Indsec Securities and Finance, said the total addressable market of domestic IT companies could shrink 20%-25%.
(Reporting by Vivek Kumar M; Additional reporting by Abhirami G in Bengaluru; Editing by Sonia Cheema)
