After a holiday pause, Indian markets reopened on Tuesday with investors finally able to react to the AI debate. The tech-services gauge that includes Tata Consultancy Services and Infosys climbed 2.2%, its strongest one-day move since Aug. 28.
That bounce comes after a long slide. The same benchmark has erased roughly $226 billion from its December 2024 high as new models from AI developers such as OpenAI and Anthropic PBC raised worries about pressure on traditional software and outsourcing work.
Anthropic Chief Executive Officer Dario Amodei called for slowing future AI development, a position endorsed by OpenAI CEO Sam Altman and SpaceXAI CEO Elon Musk. Analysts expect that kind of caution to spur short covering in Indian IT names as investors bet the disruption timeline stretches out.
Deven Choksey, managing director at DRChoksey FinServ, put it plainly: "Any narrative around regulatory restrictions on the use of AI may actually have a positive influence" on Indian IT stocks. "When the narrative shifts from unchecked development to regulated and responsible use of AI, short-covering backed by fresh buying in frontline IT stocks is quite possible."
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Valuations are helping too. The NSE Nifty IT Index is still about 36% below its record and trades near 16 times forward earnings, which Bloomberg data pegs at roughly two standard deviations under its five-year average. That setup makes the group extra sensitive to even small mood shifts.
And the macro mix is cooperating. Gary Tan, who manages portfolios at Allspring Global Investments, said, "AI slowdown chatter coupled with other macro factors, particularly a steeper yield curve and a stabilizing US dollar, can drive a short-term rebound in India IT services stocks." "These factors favor cash-generative companies trading at relatively undemanding valuations, characteristics shared by many large-cap Indian IT services names."
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