Markets: Fears of AI’s impact drag IT stocks down; Sensex, Nifty lose over 1.25%
Virendra Pandit
New Delhi: The likely impact of artificial intelligence (AI) on the future of information technology (IT) sector dragged equity benchmarks Sensex and Nifty50 down by over 1.25 percent on Friday, the media reported.
While Sensex lost 1,048.16 points (1.25 percent) and closed at 82,626.76, Nifty fell by 336.10 (1.30 percent) to close at 25,771.10.
The market witnessed a bloodbath on Friday as bears took control. Indian equities extended their downward spiral, fuelled by a persistent global technology rout continuing to weigh on heavyweight IT stocks.
On the BSE, all stocks declined except Bajaj Finance and SBI, with HUL, Eicher Motors, Tata Steel, and Titan among the top laggards.
Among sectors, the Nifty Metal index led the losses, dropping over 3 percent. The Nifty IT index pared some earlier losses after falling more than 5 percent, closing down 1.44 per cent.
In the broader markets, the Nifty MidCap index slipped 1.71 percent, and the Nifty SmallCap index fell 1.79 percent. The India VIX, the volatility gauge, surged 15.18 percent, reflecting heightened market uncertainty.
By afternoon, equity benchmarks came under severe pressure as technology stocks continued their sharp decline amid mounting concerns over AI-led disruption to India’s labour-intensive IT services model.
The broader market decline was triggered by fading expectations of near-term US rate cuts following strong American jobs data and an overnight 2.03 percent drop in the Nasdaq, which intensified concerns about global technology valuations.
Unlike the Cloud migration era, the current AI shift poses unique challenges for Indian IT firms, which have doubled in size since then and now face incumbency risk as dominant players being disrupted rather than challengers. Citi brokerage highlighted that AI’s impact is more pervasive than Cloud, which primarily affected infrastructure, while new revenue streams from AI remain small and exploratory, unable to offset losses in traditional work.
Experts said the weakness is largely driven by selling pressure in IT due to concerns around global demand slowdown, cautious tech company commentary, and uncertainty related to AI-led disruptions and job losses.
However, at present, this appears to be more of a sentiment-driven correction rather than onset of a deeper structural downturn. Domestic macro fundamentals remain relatively stable, but the market is lacking strong upward momentum, which may keep indices range-bound in the near term. Investors may adopt systematic investment plans or transfer plans to navigate volatility.
Some said that AI is likely to dramatically compress the software development lifecycle and could expand demand rather than shrink it. Lower costs and faster execution may unlock a much larger volume of projects across enterprises and consumers. Large enterprises operate in highly complex environments characterized by deep legacy software stacks, stringent regulatory environments, and mission-critical systems requiring reliability and high security.
But specialized IT service providers will continue to play critical roles in integration, compliance, and large-scale transformation.
On Friday, market breadth remained weak with 2,752 stocks declining against 1,256 advancing on the BSE, while 156 stocks hit 52-week lows compared to 76 touching 52-week highs. The Nifty Midcap 100 fell 1.38 percent to 59,633.80 and the Nifty Smallcap 100 declined 1.39 percent to 17,101.10, while Nifty Bank dropped 0.74 percent to 60,290.15.
