TCS shares crash 44% from peak to hit over 5-year low. More pain left for IT bellwether?
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The sharp decline dragged its market capitalisation down to Rs 9.60 lakh crore, also a multi-year low, slipping below the previous trough of Rs 9.77 lakh crore. With the latest fall, the stock is now down 44% from its all-time high of Rs 4,592, hit in August 2024.
TCS has also dropped to its lowest level since September 22, 2020, when it last closed at Rs 2,523. Reflecting the shift in market hierarchy, State Bank of India (SBI) earlier this week overtook the IT bellwether to become India’s fourth-largest listed company by m-cap.
The latest wave of selling followed an overnight plunge of up to 10% in Infosys and Wipro ADRs in the US. Sentiment weakened after US-based artificial intelligence startup Anthropic unveiled a new tool tailored for corporate legal teams.
Anthropic, the maker of the Claude chatbot, said the product can automate a range of legal tasks, including contract reviews, non-disclosure agreement triage, compliance workflows, legal brief preparation and standardised responses.
Why are investors rattled?
At the heart of the market reaction is growing concern that AI could fundamentally reshape the competitive landscape for software and IT services companies, eroding both profitability and market positioning.
Industries once considered relatively insulated from AI disruption, including legal services, data analytics and customer support, now appear vulnerable. If AI can automate these functions at scale, the vast IT services industry built around delivering them could face structural challenges.
Should you be worried?
Global brokerage JPMorgan has a message for panic-stricken investors: IT services firms are the indispensable “plumbers of the tech world” and their dividend yields have now hit levels last seen only during the global financial crisis and Covid-19.
As Rs 5.7 lakh crore evaporates from the sector in just eight trading sessions and the Nifty IT index crashes 19% in the short span, the Wall Street giant is turning contrarian, declaring “deep value” buying opportunities in bloodied bellwethers Infosys and TCS.
While AI tools like Claude Cowork spark fears of wholesale disruption, JP Morgan argues someone still needs to make enterprise software actually work, and that’s where Indian IT services remain irreplaceable.
“Free cash flow/dividend yields scream deep value and are crossing levels prior seen during market dislocation events such as GFC and COVID,” the analysts wrote, recommending a “barbell approach to buy deep value in large caps” with overweight ratings on Infosys and TCS, alongside growth champions Persistent Systems and Sagility.
With the sector trading at valuations previously seen only during major market crises, JPMorgan’s scenario analysis suggests limited further downside even in bear cases, while any marginal recovery in growth could drive significant upside.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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