After a brutal two-day selloff that saw Infosys and Wipro ADRs plunge as much as 14.5%, Friday’s session brought a much-needed breather. Bargain hunting kicked in at lower levels, sparking a sharp rebound as Infosys climbed 4% while Wipro gained 3%—helping both stocks close the week on a far stronger note.

As much as Rs 5.7 lakh crore evaporated from the sector in just eight trading sessions and the Nifty IT index crashed 19% in the short span. The selloff wasn’t restricted to the two, IT bellwether plunged to its over 5-year low on Friday. Coforge, LTIMindtree, HCL Tech, and Mphasis also slipped up to 4%.

The bearish sentiment stemmed from US artificial intelligence startup Anthropic, which unveiled a new tool designed specifically for corporate legal teams earlier this month. Anthropic, the company behind the Claude chatbot, said the product is capable of automating several legal functions, including contract reviews, non-disclosure agreement triage, compliance workflows, legal brief preparation and standardised responses.

Rally on the cards on Monday?

International brokerage firm JP Morgan 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, JP Morgan’s scenario analysis suggests limited further downside even in bear cases, while any marginal recovery in growth could drive significant upside.

“I am of the view that the things are not looking as bad as it is sounding. On the contrary, for most of the IT companies, it is a new birth, new business, new environment in which they will probably be flourishing in coming times,” said Deven Choksey, MD, DRChoksey FinServ to ET Now.

He added that Indian IT companies have positioned themselves strongly for this new operating model. Earlier, most firms billed clients on a time-and-cost basis, but the shift today is toward outcome-based pricing—and clients are increasingly willing to pay for measurable results. This change has been driven largely by the adoption of AI, which is helping companies save time, reduce costs, and deliver solutions faster. If agility-based development defined the previous phase, AI-led development is quickly becoming the new norm. As firms move from time-linked billing to outcome-driven revenue models, many Indian IT players are likely to secure larger and more strategic deals, especially as the business environment continues to evolve at a rapid pace.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)