Top 5 IT stocks lose Rs 1.8 lakh cr in m-cap: Mayuresh Joshi on what’s bothering investors

Mayuresh Joshi, Head of Equity Research at William O’Neil India, said the development of a new AI automation tool by AI developer Anthropic has triggered fears on the Street that it could eat into the core business of data and informational services firms.
In an interview to Business Today, Joshi said data processing firms, which is a large part of the Indian IT ecosystem, might get affected.

He cited Atlassian, ServiceNow, Salesforce, Gartner and Accenture falling significantly lower.

"But the differentiation factor that one really needs to bring about is that the AI products and platforms that these companies will keep on developing are going to probably create competition across the globe, specifically when it comes to the large IT majors who are in the process of development of products and platforms," Joshi said.

Data showed that the top five IT firms by market capitalisation (m-cap), Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd, Wipro Ltd and Tech Mahindra Ltd, lost Rs 1.78 crore in market value by 1.30 pm. These stocks were down up to 7 per cent at the time of writing this article. 

Joshi noted that Indian IT companies have a very distinct process in terms of data services, processing and outsourcing, which caters to a large part of different industry, sub-sector pools and sub-stacks.

If one look at AI and the five layers of AI deployment, the large part of the US tools and markets and products that are probably created are created in terms of products and platforms.

"I think the value addition that our companies probably can do and will do is the application layer itself. And therefore, you have to distinguish between US product and platform companies and what our companies are doing," he said.

Joshi said there is lot of competition and one has to brace for that.

Joshi largely stayed away from IT sector in the past. Joshi said the kind of automation and capital infusion that is happening with a large part of the major IT product companies, that is still going to continue.

"They are not going to stop," he said adding that it is just going to be more fierce in the next few quarters.

As this entire automation race continued, it is going to rattle the sector as a whole, he said.

"I think outside US, I think China is having a huge say when it probably comes to AI product platforms as well. I was just sitting across with somebody over the weekend and they were saying that China is producing some brilliant stuff when it comes to automation and AI. And therefore, services, which has been an integral part of not just the Indian ecosystem for our IT companies as well, are facing serious competition threats," he said.

Joshi said Indian IT company models have to evolve and that they cannot simply rely on the simple outsourcing model a couple of decades ago.

"But I think our IT companies need to start evolving in terms of ensuring that they embrace AI and probably have some element of AI at least in terms of the application layers that they are about to present," Joshi said.

Joshi said the pace at which agentic AI agents are being used, the layers are being deployed, is pretty fast. He said the entire premise is that Indian companies cannot take it with laxity. 

"I think the kind of ecosystem that is now getting created, independent system as you are putting on your screens as we speak, the codes are easily dis-affirmable by coders across the globe. So, there is no need in terms of a clouded internal coded system, which just gets within a closed environment," Joshi said.