As AI shockwaves hit global software firms, what’s in store for India’s IT titans?

This report is taken from CNBC’s ‘Inside India’ newsletter this week which brings you timely and insightful news and market commentary on the emerging powerhouse. Subscribe here.

The big story

Indian IT stocks face their biggest monthly decline since the 2008 global financial crisis, with the Nifty IT index on track to fall 20% this month, as concerns over disruption caused by artificial intelligence pressure software stocks globally.

At the Big India AI Summit last week, major tech companies participated Announce Relationships with leading Indian IT services companies to drive AI adoption across enterprises. India’s largest and second-largest IT services company, Tata Consultancy Services, has tied up with OpenAI, while Infosys a partner With ChatGPT maker rival Anthropy.

These correlations have done little to cheer markets with the Nifty IT index down 19.6% so far this month as investor concerns over the impact of rapid advances in artificial intelligence on the sector dampened sentiment.

Indian IT Industry leadersHowever, they described the application of AI as a “huge opportunity.”

“We are confident that AI will drive growth across our business and unlock the next phase of opportunities for the broader IT ecosystem,” Sham Arora, chief technology officer at Tech Mahindra, told CNBC.

But unlike the United States, where… debate Concerns about artificial intelligence remain ‘irrational’ and the potential collapse of companies offering software as a service, or SaaS, experts tell me that artificial intelligence will not make Indian companies that provide IT services irrelevant. However, it will reduce their margins.

Biswajit Maity, senior principal analyst at Gartner, told me that traditional IT services companies like TCS, Infosys, Wipro and Accenture will play a “pivotal role in enterprise AI adoption” by leveraging their customer relationships and domain expertise in integrating AI solutions.

Nvidia CEO Jensen Huang also on Thursday Try to downplay concerns about artificial intelligence, suggesting that markets have misjudged the threat faced by software companies.

But to remain relevant, Indian IT services companies need to invest in proprietary talent and platforms, develop industry-specific AI solutions, and co-innovate with customers, among other things, Maity said. While some of this work ongoingThese efforts are unlikely to protect Indian IT companies’ margins, Maite and other experts predict.

Indian IT companies collectively control One-third of the global brand value of IT services,export technology services Estimated by More than $220 billion annually, it dominates the global outsourcing landscape, making it critical to the world’s digital infrastructure.

But Indian IT companies’ business models depend on labor arbitrage, and with the advancement of artificial intelligence, this will soon be replaced by technology arbitrage, Maity said.

Indian IT companies derive the majority of their revenue from helping organizations with IT service integration and digital transformation, not SaaS. This makes AI an immediate business opportunity, but a long-term challenge.

Companies can’t “suddenly move away” from the services offered by Infosys or TCS and “move to Anthropics” right away,” Manishi Raychaudhuri, CEO of Asia-Pacific-focused financial advisory firm Emer Capital Partners, told CNBC.Within India” on monday.

But he added that customers are asking IT companies to integrate AI agents into their services, which means pricing will be affected as will the valuations of these companies.

AI will also transform the business mix of IT services companies.

Artificial intelligence could lead to a dent in managed services businesses, which account for 22% to 45% of the revenue of leading Indian IT companies, a report by global brokerage Jefferies said on Sunday. This will increase cyclicality and require a change in talent and operating model, adding more risk, she said.

Managed IT services refer to IT companies that handle the day-to-day management of organizations’ IT needs to provide support services, while consulting is a more cyclical business.

Jefferies said the performance of IT stocks would “more likely” be tied to long-term business prospects rather than near-term profits.

Indian IT companies play a pivotal role in enabling organizations to adopt AI, an area where spending is expected to rise sharply, according to Gartner. It estimates that spending on AI software will reach $985 billion by 2030, growing at a compound annual growth rate of 62.7% from 2025 to 2030 with widespread enterprise adoption.

However, Jefferies has cut its price targets for Indian IT companies by up to 33% and downgraded most of the large companies to either stable or underperforming.

Investors appear to stand by Jefferies’ assessment and appear unconvinced that AI will benefit IT services companies. With two more trading sessions to go, this month could be the worst for Indian IT stocks in nearly two decades.

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Jayant Dasgupta, a former Indian ambassador to the World Trade Organization, said India would be entitled to withdraw tariff concessions it had extended to the United States, as one side changed tariff rates, effectively reopening the agreement for negotiation.

Intel India managing director Santhosh Viswanathan said the company had been in the country “for a long time” and had been supporting New Delhi’s semiconductor manufacturing and AI ambitions.

Deepening India’s ties with France will help improve its defense system, said Payal Kanwar, Director General, Indo-France Chamber of Commerce and Industry.

Need to know

India is likely to continue buying Russian oil. India is likely to continue buying Russian oil under the US Supreme Court ruling Forbidden Import tariffs imposed by President Donald Trump have restricted his trade policy options, analysts said.

Indian trade negotiators postpone US visit. Indian trade negotiators will do so Reschedule Their planned visit to Washington, D.C., was aimed at promoting an interim trade agreement with the United States, a person familiar with the developments told CNBC.

India launches federal government-backed taxi service: challenge dominance The Indian government, which is affiliated with the American giant Uber, has launched a taxi-hailing service, “Bharat Taxi”, which will give drivers a share of the company’s profits without charging any commissions.

Indian stocks steadied amid regional gains, supported by a rise in technology stocks after Nvidia CEO Jensen Huang said markets… He misjudged the threat of AI to software companies.

In what he described as “counterintuitive,” Huang said that AI agents will not replace these software tools, but will instead use them.

The Nifty 50 index is down nearly 3% so far this year.

The yield on 10-year Indian government bonds rose by one basis point to 6.685%, while the rupee was trading flat at 90.87 against the US dollar.

Coming

February 27 – March 2: Canadian Prime Minister Mark Carney visits India

February 27: GDP data for the quarter ending December 2025

February 28: Industrial production data for January

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