Tech Mahinda, TCS, HCLTech Shares Nosedive Nearly 6%: Why 'Saaspocalypse' Still Hunting Indian IT

Stock markets remained under pressure on Thursday and ended the day in the red. The BSE Sensex closed at 83,674.92, down 0.66%, while the NSE Nifty settled at 25,807.20, lower by 0.57% compared to the previous close.

Among the biggest losers on the BSE and NSE today were Tech Mahindra, Infosys, TCS and HCL Tech. Tech Mahindra ended the day down 5.99%, Infosys fell 5.79%, TCS declined 5.41%, and HCLTech closed 4.84% lower compared to their previous closing prices.

In the second half of the session, the Nifty tried to recover from the day’s low but was still down around 80 points, trading below the 25,900 mark. The Sensex was down more than 300 points during the day.

The main reason for the decline was a sharp sell-off in IT stocks. The Nifty IT index fell 4.67% by noon, hitting a four-month low. The fall wiped out nearly ₹1.3 lakh crore in market value in a single trading session.

IT stocks on the Sensex were also down nearly 5%, showing weakness across both large and mid-sized software exporters. Among major companies, Tata Consultancy Services (TCS) dropped 4.78%, Infosys fell 4.90%, and Wipro declined 4.80%. HCL Technologies and Tech Mahindra were also down between 3% and 4% in afternoon trade.

The sharp decline was largely triggered by concerns around new artificial intelligence (AI) tools launched by US-based company Anthropic. Investors fear that its advanced "agentic AI" capabilities could replace certain traditional IT services instead of just supporting them.

Software and IT stocks had already been under pressure in recent weeks, but the sell-off intensified after Anthropic introduced new plugins for its Claude AI tool, raising worries about long-term demand for outsourcing services.

According to a Bloomberg report, Jefferies equity trader Jeffrey Favuzza described the situation as a "Saaspocalypse"—suggesting that software-as-a-service (SaaS) stocks are facing an apocalypse-like moment. He noted that investor sentiment has shifted sharply to aggressive selling, driven by fears of disruption, pricing pressure and slower future growth.

Vinod Nair, Head of Research at Geojit Investments, said the steep fall in IT stocks was also influenced by expectations that the US Federal Reserve may delay rate cuts due to strong US job data. He added that AI is globally reshaping markets by putting pressure on margins in service-based sectors.

"In India, this technology shift is likely to structurally transform IT services by accelerating delivery timelines and automating volume-driven tasks, thereby challenging the traditional headcount-based outsourcing model," Nair said. He also pointed to ongoing geopolitical tensions between the US and Iran as an additional factor making investors cautious.

However, Sunny Agrawal, Head of Fundamental Research at SBI Securities, said Indian IT companies are currently taking a wait-and-watch approach.

He explained that the IT sector has been under pressure for over a year due to global economic concerns, tariff issues, geopolitical tensions and weak spending by clients. Just as the sector was beginning to recover, it is now facing fresh worries around fast-growing AI automation. Investors fear that advanced AI tools could automate complex tasks across industries, which may hurt the traditional business model of IT services and outsourcing firms. At the same time, AI-led startups are emerging as new competitors, adding to the uncertainty.

Agrawal further pointed out that Indian IT firms have successfully handled major technology shifts in the past, including ERP systems, cloud computing and now AI. He believes companies are currently observing how AI developments unfold over the next one or two quarters before making major moves.