AI Fears Rattle Indian IT Stocks: Is the Risk Fully Priced In?

• Domestic IT stocks and valuations have moderated sharply due to AI fears, particularly after Anthropic's plug-in release and Palantir's AIP.
• AI-driven automation tools, like Anthropic's Claude Cowork and Palantir's AIP, threaten traditional IT services by automating tasks and compressing migration timelines.
• Experts like Jefferies and Motilal Oswal predict a drag on revenue growth for IT firms over the next 1-4 years, with 9-12% of IT services revenue at risk.
• TCS, Tech Mahindra, and LTIMindtree have higher exposure to application services, while Wipro and LTIMindtree lead in ERP services exposure.
• Despite the Nifty IT index correcting 16% and valuations nearing 10-year averages, analysts advise caution, suggesting further pain and selective investment.