TCS’ market capitalisation first crossed the $200-billion mark in 2021, making it the first Indian IT services company, and the second Indian company after Mukesh Ambani’s Reliance Industries (RIL), to achieve the milestone.
The stock hit an all-time high of Rs 4,592 apiece on the NSE on August 30, 2024. However, shares have since declined sharply, leading to significant market-cap erosion. The stock on Wednesday fell more than 1% to trade at Rs 2,488 apiece on NSE in afternoon trade.
The company’s market capitalisation at the end of Tuesday stood at a little over Rs 9.09 lakh crore (nearly $99 billion). Its peers Infosys, HCLTech, Tech Mahindra and others have also seen significant declines, despite intermittent bouts of recovery, amid concerns over a potential artificial intelligence-led disruption in the sector.
The rout began earlier in February after AI startup Anthropic launched plug-ins for its Claude Cowork agent, which can automate tasks across functions such as legal, sales, marketing and data analysis.
TCS and Wipro shares have fallen around 24% so far this year, while Infosys declined 21%. HCLTech and Tech Mahindra shares have dropped about 17%, while LTIMindtree has plunged around 30% so far in 2026.
‘Reports of my death are greatly exaggerated’: Nuvama on IT
Nuvama remains bullish on IT stocks, arguing that the roughly 20% correction seen since the start of the year, driven by fears of AI-led disruption following a series of AI tool launches by Anthropic, has made valuations attractive.“Reports of my death are greatly exaggerated,” Nuvama said, invoking Mark Twain’s famous line to describe the current state of the IT sector.
“Given the advent and rapid adoption of Gen AI, obituaries of the Indian IT services industry are being written everywhere. The concerns have been amplified by sharp stock reactions, first in global SaaS companies and now in IT services firms,” the brokerage said.
According to Nuvama, the Indian IT services industry is once again at a crossroads. The arrival of a new technology, Gen AI, threatens to disrupt the way the sector has operated so far, raising concerns about its near-term growth and long-term sustainability.
However, the brokerage sees no existential threat from Gen AI and believes the need for system integrators, firms that customise plug-and-play software solutions for complex enterprise environments, will remain intact.
“We also note that B2B adoption of any technology is very different from that in the B2C segment. Enterprises pursuing automation will still need someone to take ownership of the system, and that role will continue to be played by IT services firms,” it added.
Nuvama cautioned that Gen AI adoption will follow a typical technology adoption curve. IT services companies may face revenue cannibalisation in the initial phase, which they are currently experiencing, before the industry reaches an inflection point.
“Following this, the opportunity could lead to a significant expansion of TAM ($300-400 billion by 2030, according to Infosys management). However, companies are likely to pivot from a headcount-driven to an outcome-based revenue model. This will result in lower headcount additions and a weaker correlation between hiring and revenue growth in the coming years,” the brokerage said.
IT services model is here to stay
Nuvama believes the IT services model is here to stay and that the Gen AI disruption will ultimately create larger opportunities.
“Post the recent sharp correction, we find valuations across stocks highly attractive,” it said.
“We see this as a déjà vu moment for the industry and believe it will emerge from this disruption, just as it did from earlier ones, with a net expansion in its TAM. We remain positive on the sector from a medium- to long-term perspective, though near-term volatility may persist,” the brokerage added.
Nuvama upgrades major IT stocks to ‘Buy’
Nuvama now has a ‘Buy’ rating on all the top 10 IT services companies. It upgraded HCLTech, Wipro, Tech Mahindra and Hexaware Technologies to ‘Buy’ and prefers LTIMindtree, Persistent Systems, Mphasis, Infosys and Tata Consultancy Services.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)