Bearish bets on local IT counters surge as AI fears spook investors

In response to rising concerns over the impact of artificial intelligence (AI) on the IT sector, traders have significantly increased their bearish positions on Indian IT stocks, reaching unprecedented levels. According to SBI Securities, the Nifty IT index has witnessed a decline of over 17% since February 3, partly fueled by the introduction of new AI tools by companies like Anthropic. This has raised alarms regarding the future growth prospects of software exporters. The open interest in large-cap IT stock futures surged by 39%, while mid-cap contracts saw a 70% increase, indicating a strong short position buildup. Notably, major players such as Infosys, Coforge, and Persistent Systems are experiencing record-high bearish bets. Analysts suggest that the upcoming rollovers of positions to March could provide further insight into trader sentiment. So far this month, IT stocks have faced significant declines, with shares of Coforge, LTIMindtree, and Infosys dropping between 11% and 19%. The cautious market sentiment is reflected in the options data, showing limited upside expectations and a lack of new long positions among traders, as they remain defensive ahead of the monthly expiry.