Anthropic Eye and Nifty IT Sector
One of the reasons behind the fall in the stock market on Thursday was that the IT indices fell badly today. By the time the market closed, Nifty IT closed down by more than one and a half percent. The stock market did recover a little after today’s fall, but despite the recovery in the market, the Nifty IT index remained the worst performing sector index. The main reason behind this is believed to be Claude Fable 5 launched by Anthropic AI. It is expected that this can bring a big change in the IT service industry.
At around 11:44 am, the Nifty IT index was down 1.3 per cent at 27,901, becoming the worst performing sector index on the NSE. At the same time, by the time the market closed, the decline was 1.59 percent. This fall came when the benchmark Sensex and Nifty 50 were trading with slight gains after recovering from initial losses. Infosys and HCL Technologies were among the companies that declined the most in the benchmark index. Infosys fell 2.3 percent and HCL Tech fell 2.1 percent, making them the two biggest losers on the Nifty. Shares of other big IT companies were also trading in decline. Tata Consultancy Services (TCS) fell 0.8 percent, Wipro 0.6 percent and Tech Mahindra fell 0.2 percent.
There is pressure on all companies
This weakness was seen in the entire technology sector. Midcap IT stocks like Persistent Systems and Coforge also saw a big fall at the beginning of the session, indicating selling in the entire sector. This selloff happened after overnight weakness in global technology stocks. The Nasdaq Composite fell nearly 2 percent, while semiconductor stocks remained under pressure. The pressure was due to concerns over valuations and questions being raised over the sustainability of the artificial intelligence-based rally that has dominated global markets for the past year.
New developments in the field of AI further increased investors’ concerns. Anthropic on Tuesday introduced Claude Fable 5, a new “mythos-class” artificial intelligence model. The company says that this software gives a huge advantage in engineering and knowledge-work capabilities. After implementing additional security measures to address misuse concerns, this model is now being released at scale to enterprise customers.
AI’s impact on IT sector?
The launch has reignited debate about the potential impact of more capable AI models on traditional IT services and software development work. Investors are closely watching whether advances in generative AI can automate the coding, maintenance and consulting tasks that make up a large portion of the global IT services industry’s revenues. Brokerage firm HSBC has recently warned that the fall in prices caused by AI may continue to put pressure on growth in the IT services industry for the next six to eight quarters. The brokerage also said that increased merger and acquisition activity could increase AI-related risks and suggested that sector valuations could fall to a low of 13-14 times earnings.
VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said that the weakness in US technology stocks may increase further in the near future. He said that the weakness seen in US tech stocks since last Friday is likely to intensify further, but looking at the current situation, it is unlikely that FIIs will become buyers in India because right now the interest of FIIs in India is very less. If there is a big decline in AI stocks, the situation may change. Therefore, we have to keep an eye on the trend of AI stocks. Despite pressure on technology stocks, the broader market recovered from morning lows.
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