The Anthropic Shock: What India's Worst IT Selloff Since 2008 Actually Tells Us

TL;DR: A single product launch by Anthropic wiped Rs 1.9 lakh crore off Indian IT stocks in two days. But the real story isn't about one AI startup. It's about an industry that built a $250 billion empire on labour arbitrage and now faces an identity crisis it saw coming but didn't prepare for.

Two Days, $12 Billion Gone

On February 12, 2026, the Nifty IT index did something it hadn't done since the global financial crisis. It fell 10.5% in two trading sessions. TCS, India's largest IT company, saw its market cap slip below Rs 10 lakh crore for the first time since December 2020. Infosys crashed 13% to a 52-week low. Wipro, HCL Tech, Coforge, and Tech Mahindra all dropped 5-6% in a single session.

The trigger? Anthropic launched Claude Cowork, a suite of enterprise automation tools with industry-specific plugins for legal, financial, and sales workflows. Alongside it came Claude Opus 4.6, an AI model capable of coordinating entire teams of AI agents to tackle complex projects autonomously.

Markets read this as a death sentence for the outsourcing model. Goldman Sachs' US software stock basket fell 6% in one session, the steepest daily loss since the tariff-induced slump of April 2025. And the pain wasn't limited to the US. Indian IT giants, 8,000 kilometres away, bore some of the heaviest losses.

Why Did Indian IT Catch the Worst of It?

Here's what matters: Indian IT companies aren't software product companies. They're services firms. They make money by deploying large teams of engineers to write code, maintain systems, and manage infrastructure for global clients. Revenue is directly tied to headcount. More people deployed equals more money billed.

When an AI tool demonstrates it can read files, organize workflows, draft documents, and coordinate multi-step projects, it attacks the foundation of that model. It's not just about coding. Claude Cowork's plugins target exactly the tasks that Indian IT teams handle: contract review, data processing, report generation, system maintenance.

JPMorgan's extreme bearish scenario assumes zero growth indefinitely due to AI disruption, implying potential downside of up to 39% for TCS, Infosys, and HCL. JM Financial slashed target prices across IT stocks by as much as 44%.

That's the fear talking. But is it justified?

The Numbers Behind the Panic

The data paints a more complicated picture than either the bulls or bears want to admit.

The case for worry is real:

• TCS cut nearly 20,000 jobs in late 2025, its largest layoff ever. CEO K Krithivasan attributed it to "skill mismatch" rather than AI, a distinction many found unconvincing.
• Infosys reduced headcount by an estimated 20,000 (7%) between FY23 and FY25.
• AI threatens to put 500,000 Indian IT jobs at risk over the next three years, according to industry estimates.
• Indian IT firms invested only about 2% of revenue on R&D over the past five years. Microsoft spent 12% of its $282 billion revenue on R&D in FY25. That's not a gap. That's a canyon.

But the counter-narrative has substance too:

• Gartner forecasts the Indian IT services sector will grow 11.1% in 2026, driven by AI-related spending.
• Infosys is running 225 generative AI programs for clients and has trained over 250,000 employees in GenAI technologies.
• TCS partnered with OpenAI to develop AI infrastructure in India, including a 100MW data center.
• Wipro completed a generative AI initiative with Google Cloud, delivering 200 production-ready AI agents.
• Tier-I IT firms are projected to deliver revenue CAGR of 6.9-13.2% over FY25-28.

The stock market reaction wiped out far more value than the immediate business fundamentals justify. But the underlying anxiety isn't irrational. It points to a structural transition that Indian IT has been slow to acknowledge.

What the Headlines Got Wrong

Most coverage of the selloff fell into one of two camps: AI will destroy Indian IT, or the selloff was just panic and everything's fine.

Both miss the point.

The real question isn't whether AI will eliminate IT services. It won't, at least not in the near term. The question is whether Indian IT companies can transition from being labour brokers to being AI implementation partners before their margins get squeezed.

Consider what actually happened at the India AI Impact Summit 2026. While headlines focused on shirtless protesters and a fake robodog, the substance of the summit told a different story. Microsoft committed $17.5 billion to India (its largest investment in Asia). Google pledged $15 billion for data centres. Amazon committed $35 billion across India over five years. India expects to attract over $200 billion in AI-driven investments over two years.

That money is going somewhere. The companies that can capture it will thrive. The ones that can't will bleed.

Vinod Khosla told the summit that IT services and BPO could "almost completely disappear" within five years. That's hyperbolic, but it captures a real directional truth: the volume-based model is dying. What replaces it matters enormously.

The R&D Problem Nobody Wants to Talk About

Here's the uncomfortable fact that the "everything's fine" camp ignores: Indian IT's underinvestment in R&D is not a new problem. It's a chronic one. And AI just made it urgent.

When your competitors are spending six times more on research as a share of revenue, you're not in a position to lead the AI transition. You're in a position to be disrupted by it.

An ICRIER study found that India's IT firms aren't hiring enough workers with LLM operations skills, aren't expanding R&D divisions, and aren't investing adequately in training. Nearly 64% of Indian IT companies integrated GenAI tools in 2025, but only 38% of employees felt confident using them in production.

The industry has a habit of announcing AI initiatives while leaving the core business model untouched. Training 250,000 employees sounds impressive until you realize it's often a two-day workshop, not a fundamental reskilling.

What Happens Next

The IT sector's correction has brought valuations to their lowest in years. The Nifty IT P/E ratio has fallen below the Nifty 50 benchmark. Infosys trades at 19.78x trailing earnings. For investors with a three-year horizon, some analysts see this as a buying opportunity.

But here's what separates the companies that will recover from those that won't:

Winners will: Build proprietary AI platforms, invest heavily in R&D (not just partnerships), develop consulting capabilities that help clients deploy AI, and accept lower headcount with higher revenue per employee.

Losers will: Slap "AI-powered" labels on existing services, continue to rely on headcount billing, treat AI training as a checkbox exercise, and wait for the storm to pass.

The storm isn't passing. Every Anthropic launch, every new Claude capability, every enterprise AI tool that gets a little better at automating knowledge work tightens the vice. The question for India's $250 billion IT industry isn't whether to change. It's whether the change happens fast enough.

The Bigger Picture

India's tech workers are already feeling the squeeze. Urban youth unemployment stands at 19%. Entry-level IT salaries have grown less than 10% in 15 years while living costs have surged. Reports of workplace distress, including suicides among tech workers, have forced the industry into a reckoning it would rather avoid.

The AI disruption story isn't just about stock prices. It's about millions of families whose economic mobility was built on the promise that a computer science degree equals a stable career at Infosys or TCS. That promise isn't broken yet, but it's cracking.

The companies that survive this transition will be fundamentally different from the ones that built the industry. Smaller workforces, higher-value services, more R&D, less body-shopping. Whether that's good or bad depends on who you ask and, more importantly, on whether anyone is building a safety net for the workers caught in between.

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The Balanced News tracks how media frames major stories. Read our analysis of how protest coverage overshadowed AI policy discussions at the same summit that sparked this selloff.

Sources

• Business Standard: Indian IT stocks may stage technical rebound after selloff
• Fortune: Anthropic's Claude triggered a trillion-dollar selloff
• Yahoo Finance: Selloff wipes out nearly $1 trillion from software and services stocks
• Business Today: JM Financial cuts IT stock targets up to 44%
• CNBC: Why India's IT sector is shedding jobs
• Rest of World: India's tech workers in crisis amid suicides, layoffs, and AI
• Fortune: AI investments surge in India as tech leaders convene for Delhi summit
• Invezz: Inside the great Indian IT selloff
• The Register: Indian think tank finds strong hiring for jobs AI threatens
• Equitymaster: 4 IT stocks in India transitioning into AI leaders
• CNBC: AI is taking over core operations of Indian IT companies