- Indian IT has slipped 16.5% YTD, yet a "reverse AI trade" may reverse the trend.
- Infosys‑Anthropic tie‑up positions Indian firms as builders of custom, purpose‑built language models.
- Jefferies estimates a $300‑400 bn AI services market by 2030, with Indian IT poised to capture a sizable slice.
- Employment remains robust – 5.8 mn jobs, net +126k hires in FY25, cushioning macro risk.
- Key valuation metrics: Nifty IT down 22% YoY, but fundamentals (margin expansion, AI bookings) are improving.
You’re missing the AI goldmine that could turn Indian IT from laggard to leader.
Chris Wood of Jefferies calls India’s emerging theme the “reverse AI trade.” Instead of being displaced by large‑scale, off‑the‑shelf models, Indian IT services are becoming the architects of smaller, proprietary language models tailored to corporate data. The recent strategic alliance between Anthropic – a fast‑growing generative‑AI pioneer – and Infosys is the flagship example. Together they will co‑develop custom AI agents that embed client‑specific knowledge, offering a higher ROI than generic ChatGPT‑style tools.
Why Infosys’s Anthropic Tie‑Up Signals a Reverse AI Trade
The partnership validates a core hypothesis: enterprises will shift from buying monolithic AI platforms to commissioning niche models that safeguard data privacy and align with industry‑specific vocabularies. Infosys reports that 90% of its top‑200 clients already consume its AI services, proving demand is not speculative. By leveraging Anthropic’s research‑grade foundation models and Infosys’s delivery engine, the duo can accelerate time‑to‑value for banks, manufacturers, and health‑care firms that need tight integration with legacy systems.
From a valuation standpoint, the collaboration could unlock higher‑margin consulting contracts. Custom model development commands premium pricing (often 30‑40% above standard SaaS licensing) and creates sticky, multi‑year revenue streams. For investors, this translates into potential earnings‑per‑share (EPS) upside that the market has yet to price in.
How the Nifty IT Index’s Slide Shapes Your Portfolio
Since the start of 2026, the Nifty IT index is down 16.5% while the broader Nifty has slipped only 1.5%. Over the past twelve months the sector has fallen 22%, a stark underperformance that has rattled sentiment. Yet the index’s trajectory masks a divergence between headline numbers and underlying fundamentals.
All constituents are in the red this session – Coforge (-2.5%), LTI Mindtree (-2.0%), and the likes of Wipro, Tech Mahindra, and TCS – but the breadth of the decline reflects a market over‑reaction to AI‑disruption fears rather than a structural earnings collapse. Balance sheets remain strong, cash conversion cycles are healthy, and order‑books show a growing share of AI‑related projects.
Sector‑Wide Implications: Jobs, Growth, and Market Opportunity
The IT services sector employs roughly 5.8 million professionals, making it a cornerstone of India’s white‑collar economy. Hiring momentum slowed after a peak of 445k net hires in FY22, yet FY25 still saw a net addition of 126k – a sign that the sector is not on the brink of a talent exodus.
Jefferies’ “AI First” outlook projects a $300‑$400 bn market for AI services by 2030. If Indian firms capture even 10% of that pie, we are looking at $30‑$40 bn of incremental revenue, a multiple‑digit boost to sector‑wide EBITDA margins. Historically, whenever Indian IT firms have successfully pivoted to emerging tech (e.g., cloud services in 2015‑17), the market rewarded them with 20‑30% valuation re‑ratings within two years.
Technical note: A “reverse AI trade” is the inverse of the classic narrative where AI replaces traditional IT labor. Here, IT firms become the indispensable layer that custom‑fits AI to enterprise data, turning a perceived threat into a new revenue engine.
Investor Playbook: Bull vs. Bear Cases for Indian IT
Bull case: Continued client adoption of bespoke AI agents drives double‑digit top‑line growth for Infosys, TCS, and Wipro. Margin expansion accelerates as high‑margin AI consulting offsets pressure from low‑margin offshore delivery. The sector re‑ratings lift the Nifty IT PE multiple from ~15x to 20x, delivering a 30‑40% upside for current valuations.
Bear case: If global macro headwinds curb capex, AI projects may be delayed, prolonging the current discount. Additionally, a mis‑step in data‑privacy compliance could trigger regulatory setbacks, eroding client confidence. In this scenario, the Nifty IT could remain 10‑15% under the broader market for the next 12‑18 months.
Strategic positioning: Allocate a core exposure to the sector’s heavyweight (TCS, Infosys) for stability, and overlay a tactical tilt toward pure‑play AI enablers like Coforge and LTI Mindtree, which stand to benefit disproportionately from custom‑model contracts.
Bottom line: The “reverse AI trade” narrative is shifting the risk‑reward balance. While the index’s recent slide creates a buying window, the real catalyst will be the pace at which Indian IT firms convert AI ambition into billable services. Stay alert to quarterly AI‑booking updates – they may be the next price‑moving data point.