IT Stocks Lose ₹1.9 Lakh Crore as Anthropic AI Sparks Sell-Off

Introduction: A Jolt from Artificial Intelligence

Indian IT stocks experienced a sharp downturn on Wednesday, February 4, 2026, as investor sentiment soured following a significant announcement from the world of artificial intelligence. Major companies including Infosys, Tata Consultancy Services (TCS), and Wipro saw their share prices fall by up to 7%, leading to a collective erosion of ₹1.9 lakh crore from the market capitalization of the Nifty IT index. The sell-off was triggered by the launch of new workplace productivity tools by US-based AI startup Anthropic, sparking fears about the long-term viability of the traditional IT services business model.

The Catalyst: Anthropic's New AI Tools

The market turmoil began after Anthropic, a prominent AI research company known for its Claude chatbot, unveiled a suite of new plugins and tools. These tools are designed to automate a wide range of professional tasks, particularly in corporate legal departments. The company announced that its product can handle functions such as contract reviews, sorting non-disclosure agreements, managing compliance workflows, and preparing legal briefs. By targeting these back-office and knowledge-based tasks, Anthropic's AI directly competes with services that have long been the core business for India's outsourcing giants.

Carnage on Dalal Street

The reaction in the Indian market was swift and severe. As trading began, the Nifty IT index plunged, reflecting widespread panic among investors. Infosys and Mphasis were among the hardest hit, with their shares declining by over 7%. Other major players also faced significant losses, with LTIMindtree and HCL Tech falling between 5-6%, while Wipro and TCS saw declines of around 4% and 7% respectively. The sell-off wiped out approximately ₹1.9 lakh crore in market value, bringing the total capitalization of the Nifty IT index down to around ₹30 lakh crore.

A Global Ripple Effect

The negative sentiment was not confined to India. It was a spillover from Wall Street, where the tech-heavy Nasdaq Composite had fallen 1.4%, erasing nearly $100 billion in market value from the sector. The American Depository Receipts (ADRs) of Infosys and Wipro had already tumbled overnight by 5.6% and 4.8% respectively, signaling a difficult opening for the Indian markets. The sell-off in the US also impacted software and data service companies like Gartner, which plunged around 25%, and IT services firms like Accenture and Cognizant, which fell by about 10%.

The Core Fear: A Challenge to the Outsourcing Model

For decades, the Indian IT industry has been built on a foundation of labor arbitrage, performing essential but often repetitive tasks for global corporations at a lower cost. The fear gripping investors is that advanced AI tools, like those from Anthropic, could automate a significant portion of this work. If companies can use an AI subscription to review legal documents or manage data analysis, the need to outsource these tasks to large teams of people diminishes. This poses an existential threat to the billable-hours model and could lead to significant margin pressure and reduced demand for traditional IT services.

Analyst Commentary and Shifting Sentiments

The market's reaction was amplified by cautious commentary from financial analysts. International brokerage Jefferies noted in a report that it had reduced its exposure to the IT sector in its India model portfolio. The brokerage's weight for the sector now stands at 5.6, well below the MSCI India index weight of 9.7. This move comes amid sustained outflows from foreign portfolio investors, who have pulled approximately $14 billion from Indian equities over the past 16 months, with the IT sector being one of the most affected.

Anthropic's Clarification

In response to the market reaction, Anthropic clarified that its tools are not designed to provide legal advice and that any AI-generated analysis should be reviewed by licensed professionals. The company, founded in 2021 by former OpenAI employees, also announced several open-source products aimed at automating a broader range of tasks in sales and customer support. However, this clarification did little to calm investor nerves, as the direction of technological advancement points clearly toward greater automation.

Conclusion: A Wake-Up Call for Indian IT

The sharp sell-off on February 4 serves as a stark reminder of the disruptive power of artificial intelligence. While the immediate impact was a significant loss in market value, the long-term implications are far more profound. The Indian IT industry is now at a crossroads, facing the urgent need to evolve from a service-based model to one that integrates and leverages AI to provide higher-value, outcome-based solutions. The future of the sector will depend on its ability to adapt to this new reality, where automation is not just a tool for efficiency but a fundamental competitor.