As AI panic grips IT stocks, where are market opportunities for big and small investors?

Indian IT stocks are facing significant pressure as concerns mount over the impact of artificial intelligence on traditional outsourcing models. Major companies like Wipro and TCS have seen their share prices decline by over 30% from their peaks, while Infosys is down about 25%. This downturn is attributed to fears that AI tools could diminish the need for extensive programming teams, thereby undermining the core value proposition of Indian IT services. Analysts note that while AI may enhance productivity, it is compressing revenue models tied to billing. Amidst this uncertainty, investors are grappling with whether the current market dynamics represent a temporary downturn or a fundamental shift. Some analysts believe that the recent corrections have made valuations of large IT firms more attractive, suggesting a gradual accumulation of shares rather than panic selling. Conversely, others advocate for a shift towards sectors like banking, capital goods, and pharmaceuticals, which are benefiting from robust domestic demand and improved financial health. The banking sector, in particular, is experiencing healthy credit growth and low non-performing assets, making it a favorable area for investment. As investors reassess their strategies, the evolving landscape presents both challenges and opportunities across various sectors in India's economy.