The broader Indian equity market slipped 6‑7% on Wednesday, reflecting a pullback from the last quarter’s AI‑fueled rally.
The NIFTY IT index bucked the trend, climbing 3.5% to 4% as investors re‑allocated capital toward the sector. Valuations have fallen to a multi‑year low, sparking speculation that the IT space may have bottomed out.
Jitendra Gohil, CIO‑Listed Equities at Bajaj Alts, said the AI trade’s cooling could bring fresh inflows into Indian IT services. He cautioned that a sharp earnings turnaround is unlikely soon, noting investors will look for a higher share of AI‑related revenue in companies’ top lines before committing.
US bond yields pose a secondary threat: if the 10‑year Treasury rises to 5.5‑6%, the cost of AI‑infrastructure capital will climb, slowing spend. Gohil highlighted that hyperscalers, with roughly $630 billion of debt, are already running negative free cash flow after heavy capex, a warning sign for the wider tech ecosystem.
Going forward, analysts will monitor AI‑spending trends, bond‑yield movements, and the next quarter’s earnings for signs of a sustainable recovery. The market will also be keen on any policy shifts that could ease capital‑intensive AI projects.