Indian IT Stocks Crash: Why Anthropic AI Triggered a 2 Lakh Crore Selloff

The Indian information technology sector witnessed a massive selloff on February 4, 2026, as shares of industry heavyweights plummeted following the launch of advanced AI automation tools by US-based startup Anthropic. The Nifty IT index recorded its steepest intraday fall in years, wiping out approximately 2 lakh crore in investor wealth. Market leaders such as Infosys and Tata Consultancy Services (TCS) bore the brunt of the decline, with Infosys marking its most significant single-day drop since May 2023.

The Scale of the Market Meltdown

By midday on Wednesday, the BSE IT index had dropped 6.21 per cent to 34,844.43. Infosys, India's second-largest IT firm, saw its shares plunge 8.23 per cent to trade at 1,518.80. This sharp decline resulted in the erosion of over 54,000 crore in market capitalisation for the company, bringing its total valuation down to 6.31 lakh crore. The ripple effect was felt across the board, with TCS falling 6.50 per cent and Tech Mahindra dropping 5.79 per cent.

Other major players also faced intense selling pressure. Persistent Systems crashed over 7.5 per cent, while LTIMindtree and Wipro saw declines of 7.6 per cent and 6.7 per cent respectively. This collective rout represents one of the most volatile sessions for the Indian tech sector since the pandemic-induced crash of March 2020. Analysts noted that the selling was aggressive, reflecting a 'get me out' sentiment among institutional investors.

Anthropic and the SaaSpocalypse Trigger

The catalyst for this global tech rout was the announcement by Anthropic regarding new plugins for its Claude Cowork agent. These tools are designed to automate complex professional tasks across legal, sales, marketing, and data analysis functions. Specifically, the launch of an AI tool for in-house legal teams—capable of reviewing contracts, managing compliance, and drafting legal briefs—reignited fears that AI is moving beyond assisting humans to replacing them.

This shift in perception has been termed a 'SaaSpocalypse' by some international brokerages. The concern is that traditional IT service models, which rely on labor arbitrage and large teams of engineers for routine tasks, may become obsolete. If AI agents can execute entire workflows without human intervention, the billable-hour model that has sustained the Indian IT industry for decades faces an existential threat.

Global Tech Sentiment and Nasdaq Impact

The weakness in Indian markets mirrored a sharp decline on Wall Street. The tech-heavy Nasdaq index fell 1.43 per cent overnight, erasing nearly 300 billion dollars in market value across the US software sector. Global giants like Salesforce, ServiceNow, and Atlassian all traded significantly lower as investors recalculated the long-term growth prospects of software firms in an AI-dominant landscape.

Even AI hardware leaders like Nvidia and Microsoft saw their shares slide by nearly 3 per cent. The market reaction suggests a growing consensus that while AI may benefit certain infrastructure providers, it creates intense pricing pressure and narrows the competitive moats for service-oriented firms. The volatility in the US markets directly constrained any potential for a rally in the Indian IT index.

Comparative Performance of Major IT Stocks

Structural Disruption vs Cyclical Weakness

Financial analysts are debating whether this crash is a temporary knee-jerk reaction or a sign of structural disruption. Some experts argue that AI is no longer just augmenting services but is beginning to replace labor-intensive workflows. Platforms capable of executing complex enterprise transformations in weeks—tasks that previously took years—represent a fundamental compression of time and cost.

However, others believe the market may be overestimating the immediate threat. Indian IT giants possess deep domain expertise and long-standing relationships with Fortune 500 clients. While routine tasks like coding maintenance and document review are being automated, the role of IT firms as architects of AI-driven business transformations could provide a new avenue for growth. The challenge lies in pivoting from volume-based hiring to outcome-based value creation.

Historical Context of IT Sector Falls

Market Impact and Future Outlook

The selloff has also been exacerbated by persistent selling from Foreign Portfolio Investors (FPIs). Overseas funds have withdrawn approximately 34 billion dollars from Indian equities over the last 16 months, with the IT sector being one of the most affected. High valuations in the sector have left little room for fundamental support, making stocks vulnerable to news-driven shocks like the Anthropic announcement.

Despite the gloom, there are minor positive catalysts on the horizon. The recently concluded US-India trade deal and the 2026 Union Budget's tax holidays for data centers offer some long-term structural benefits. However, these are currently overshadowed by the immediate fear of AI-led displacement. Investors are now looking toward the upcoming Monetary Policy Committee (MPC) meeting on February 6, though a change in stance is considered unlikely.

Analysis of the AI Threat

The core of the investor anxiety stems from the realization that AI agents can now inhabit the application layer. They do not just generate code; they execute workflows. For the Indian IT sector, which has thrived on labor arbitrage, this means the 'service layer' of the global technology stack is being automated away. The value is migrating from the people who manage the software to the intelligence that powers it.

To survive this transition, Indian IT firms must evolve. The era of linear growth linked to headcount is likely ending. Companies like TCS and Infosys must now focus on selling results rather than hours. They need to build proprietary AI platforms and agentic workflows to remain relevant. The current market correction is a clear signal that the technology is moving faster than many boardroom strategies.

Conclusion

The crash of February 4 serves as a stark reminder of the disruptive power of artificial intelligence. While the immediate loss of 2 lakh crore in market value is staggering, the long-term implications for the IT services business model are even more significant. As Anthropic and OpenAI continue to redraw the boundaries of what software can achieve, Indian IT giants must either adapt to the new AI-native architecture or risk obsolescence. The market has sent a warning shot; the next few quarters will determine which firms can successfully navigate this violent evolution.