The sell-off has been violent in terms of wealth erosion. Nifty IT’s market cap erosion in February was over Rs 6 lakh crore. Investor anxiety stemmed after a new tool from Anthropic forced everyone to rethink how quickly automation could move from back-office tasks into revenue-heavy IT services workstreams.
In the current correction, companies seen as tied to legacy, people-heavy application maintenance and traditional managed services have been derated the hardest, while select smaller names have held up or rallied on the expectation that AI spending will first drive demand for infrastructure, integration solution providers.
Based on the past one-month performance, 25 stocks in the broader IT and tech services universe delivered positive returns even as many frontline names corrected sharply. The gains were led by Blue Cloud Softech Solutions, up 33%, Kellton Tech Solutions, up 32%, Datamatics Global Services, up 28%, and Ramco Systems, up 26%.
Other notable gainers included Innovana Thinklabs, which rose 19%, Moschip Technologies, whose shares gained 19%, Ceinsys Tech, up 16% and Netweb Technologies India, which also booked 15% gains.
Analysts say investors should not treat IT as one pack. Vipul Bhowar, Senior Director and Head of Equities at Waterfield Advisors, frames the shift as the sector moving from digital transformation to compute and intelligence.
In his view, the market is rewarding firms that can combine high-performance hardware capability, including GPUs, with cloud and AI services, while commoditised application maintenance faces faster automation. He also points to a margin split, with high-end cloud consulting and AI orchestration delivering margins that can be 15-20% higher than standard services, and argues that compute capacity and GPU management are becoming competitive differentiators rather than just headcount scale.
That partly explains why a chunk of winners sit closer to the picks end of the AI cycle. Netweb, for instance, is commonly associated with high-performance computing systems and enterprise infrastructure builds, which tends to be an early-stage requirement when companies scale model training, inference and data workloads.
Hardware-facing and network-facing names also appear in the outperformer set. D-Link India sits in networking equipment, while Black Box is identified with enterprise network and digital infrastructure services. Dynacons Systems and Allied Digital are known for IT infrastructure, systems integration and managed services in a more infrastructure-led sense rather than pure application outsourcing.
These are the sorts of vendors that can benefit when enterprises refresh networks, endpoints, data centre capacity and hybrid cloud setups to support AI adoption.
A second cluster among gainers points to specialised engineering and silicon adjacency. Moschip, for example, is positioned around semiconductor and embedded systems work, a theme that often attracts incremental interest when the market narrative shifts toward accelerated computing and the hardware stack that enables AI.
Even when AI reduces the need for certain routine software work, it can raise demand for hardware-aligned engineering, device-side compute and embedded integration across industries.
A third set reflects enterprise software and workflow platforms that can sell automation as product rather than automation as effort reduction. Names such as Ramco Systems and Datamatics fall closer to enterprise applications, BPM and digital operations themes.
In an environment where clients want productivity gains, analysts say vendors that ship software platforms, automate processes, or run outcome-linked digital operations can be viewed as relatively better placed than firms billing primarily on time and material.
Analysts also flag that the slump in largecap IT has not been driven only by one headline. There are also fears of AI disruption have combined with broader concerns around demand, project timelines and pricing pressure across the traditional IT services model. Large Indian IT firms still derive a meaningful share of revenue from managed services and application work where productivity tools can compress billed effort.
Even if AI creates new projects, the near-term debate is whether revenue dollars will shift from labour hours to fixed-price, platform-led and IP-led constructs, which can take time to scale.
Nitant Darekar, Research Analyst at Bonanza, argues the sector is being repriced for that transition. He sees a bifurcation emerging, with firms exposed to GPU cloud infrastructure, data centre buildouts and AI implementation services looking better positioned than legacy, labour-intensive peers. He also points to the need for selectivity, since not every “AI-aligned” stock will have the order book strength and earnings visibility to justify a re-rating.
It should be noted that many of the stocks that rose are smaller, have thinner liquidity, and can move sharply on sentiment. A 20-33% move in a month can reflect genuine order flow, but it can also reflect positioning, low float dynamics and fast-moving narratives.
However, a meaningful share of the stocks that rose appear to be linked, directly or indirectly, to the enabling layer of AI adoption. That includes compute and infrastructure, networking, systems integration, specialised engineering, and workflow platforms that monetise automation rather than get disrupted by it.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
