'Indian IT has created immense wealth': What Vijay Kedia says on sunrise, sunset sectors

On a day Indian information technology (IT) stocks witnessed a sharp selloff, market veteran Vijay Kedia said Indian IT had created immense wealth but questioned whether the next decade would be about reinvention or repetition.

His post came amid concerns that advanced artificial intelligence tools could eat into the revenues of IT companies, a fear that has weighed on technology stocks globally.

Earlier in the day, Infosys shares plunged 5.18 per cent to hit a low of Rs 1,396 apiece. TCS fell 4.58 per cent to Rs 2,776, while HCL Tech declined 4.55 per cent to Rs 1,480.50. Wipro slipped 3.76 per cent to Rs 221.10 and Tech Mahindra dropped 4.84 per cent to Rs 1,555.

The combined market capitalisation of these IT firms stood at Rs 23,71,285 crore in intraday trade on Thursday, compared with Rs 24,71,656 crore on Wednesday, translating into an erosion of Rs 1,00,372 crore.

Kedia advised investors to stay invested in a sunrise industry at any cost, while staying out of a sunset industry at any cost. His post had garnered over 22,000 views at the time of writing.

Recently, US-based Palantir Technologies Inc in its earnings call highlighted how the company is upending pay per seat software as well as third-party software with its own AI offerings. The company also shared a few examples of clients getting rid of third-party software. In addition, Palantir also mentioned that its AI platform was powering complex SAP migration work, compressing implementation timeline from years to weeks.

Also, Anthropic's entry into automating low-level legal services work and Gartner's muted guidance also raised concerns over IT demand.

"Before Palantir's comments on ERP, we estimated 30-40 per cent of IT services revenues at risk from AI deflation, largely focused on app development, maintenance, and testing. Assuming a 30-50 per cent productivity hit on low level work in these areas, we believe 9-12 per cent of IT services revenue stands to be eliminated. We expect this to happen over 3-4 years, underscoring a 2 per cent hit on revenue growth each year," MOFSL said last week.