IT stock selloff timeline: Charting Anthropic impact; worst dip since dot-com era; 2 scenarios

With Anthropic’s product launches in February hitting information technology (IT) stocks globally, Indian IT stocks took a heavy knock. Ten IT stocks from the Nifty IT index plunged 11-28 per cent for the month, with stocks such as Coforge Ltd, LTIMindtree Ltd, Tech Mahindra Ltd, Persistent Systems Ltd and Infosys Ltd falling over 20 per cent each. HCL Technologies Ltd, Mphasis Ltd, Tata Consultancy Services Ltd (TCS_ and Wipro Ltd declined over 15 per cent each. MOFSL said recent connector and partnership announcements suggest AI platforms are building ecosystems rather than fully displacing incumbents. If AI becomes a workflow partner inside enterprises, IT vendors can participate in integration and execution, it said. "Potential opportunity areas include building connectors and APIs, redesigning enterprise processes, embedding governance frameworks, managing AI-led modernization programs, and acting as channel partners to AI-native firms," it said.

But revenue mix may matter. MOFSL said vendors with higher exposure to consulting, AI-led implementation, and IMS appear relatively better placed, while firms more dependent on AMS and BPS carry higher deflation exposure. "Over the next 3–6 months, we will track AI-native partnership announcements involving Indian IT vendors and evidence of AI-led short-cycle deal wins. Key indicators include pricing commentary in managed services, order book trends in ERP and modernisation, and deal pipeline conversion linked to AI-led transformation programs," MOFSL said. It offered two scenarios:   In scenario 1, it sees front-loaded deflation which may last 12-18 months. Under this scenario, if deflation materialises rapidly, revenue growth could decelerate sharply across FY27-FY28, driving EPS cuts of 10 per cent across large-cap IT stocks. "On these bearish estimates, large-caps would trade at 18 times for both FY27E/FY28E PE. This compares to 15-16 times 12-month forward PE at the bottom of the last cycle," it said.

In scenario 2, it suggested a gradual deflation along with cyclical recovery. "Enterprise complexity, legacy estates, and governance constraints could slow adoption and back-ended productivity gains. In this scenario, near-term growth is more dependent on cyclical recovery, partially offset by AI deflation. Notably, aggregate revenue and EBIT growth bottomed out two quarters ago, with meaningful improvement in 3QFY26 across large-, mid-, and small-cap companies," it said.