TCS Shares Crash 44% From Peak to Hit Over 5-Year Low; More Downside Ahead?

Shares of Tata Consultancy Services (TCS) plunged to a five-and-a-half-year low of ₹2,585 on Friday as the ongoing IT sector rout intensified for the second consecutive session. The sharp fall has wiped out significant shareholder value, with the stock now down 44% from its all-time high of ₹4,592 recorded in August 2024.

The steep correction comes amid growing concerns that artificial intelligence (AI) advancements could disrupt traditional IT services business models, impacting revenue visibility for large Indian technology companies.

Market Capitalisation Falls Below ₹10 Lakh Crore

The sharp decline in TCS shares dragged its market capitalisation down to approximately ₹9.60 lakh crore, a multi-year low. This also marks a shift in India’s corporate ranking landscape, with State Bank of India (SBI) recently overtaking TCS to become the country’s fourth-largest listed company by market value.

The current market value is even lower than the previous trough of ₹9.77 lakh crore, underscoring the magnitude of the correction.

The last time TCS shares traded near the ₹2,585 level was in September 2020, during the post-pandemic recovery phase.

IT Sector Extends Losses

The selloff was not limited to TCS. Other major IT stocks also witnessed heavy selling pressure:

• Infosys fell up to 7.61%.
• HCL Technologies declined 4.32%.
• Wipro dropped 4.45%.
• Tech Mahindra slipped 2.41%.

The sector weakness followed a 2.03% drop in the Nasdaq Composite overnight, reflecting global technology stock pressure. American Depository Receipts (ADRs) of Infosys and Wipro also showed persistent weakness, amplifying negative sentiment in domestic markets.

Why Are TCS Shares Falling?

1. AI-Led Disruption Concerns

The primary concern weighing on IT stocks is the potential impact of generative AI and automation tools on traditional outsourcing models. Market participants are assessing how emerging AI technologies could reduce demand for certain IT services, particularly in coding, support, and maintenance operations.

The so-called “Anthropic shock” has intensified these fears, though the full implications for Indian IT companies remain uncertain.

2. Weak Global Tech Sentiment

Indian IT companies generate a large portion of their revenue from U.S. and global clients. Weakness in U.S. technology stocks and cautious corporate IT spending outlooks have directly impacted investor confidence.

3. Profit Booking and Technical Breakdown

With TCS breaking below key support levels, technical selling accelerated. The stock’s decline of 44% from its peak reflects both fundamental concerns and momentum-driven selling.

Analyst Views: Panic or Opportunity?

Despite the sharp fall, some market experts urge caution against panic selling.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that the real impact of AI-led disruption on Indian IT companies is still unclear. He believes that panic-driven exits at this stage may not be the most prudent strategy.

According to some brokerages, the steep correction could present selective value-buying opportunities for long-term investors, particularly if global tech spending stabilizes.

However, near-term volatility is likely to persist as markets reassess earnings growth visibility.

How Does This Impact Indian Markets?

The IT sector accounts for the second-largest profit pool in India Inc, making it a key driver of benchmark indices. The ongoing correction has triggered broader weakness in Indian equity markets.

Interestingly, some analysts argue that the global correction in AI-driven stocks may eventually benefit Indian markets. Last year’s global rally was largely led by AI-heavy U.S. stocks, where India had limited participation. A more balanced market rotation could improve relative positioning.

What Should Investors Watch Next?

Future movement in TCS shares will largely depend on:

• Clarity on AI’s impact on outsourcing contracts
• Recovery in global technology spending
• U.S. economic data and Federal Reserve policy
• Quarterly earnings guidance from major IT firms
• Stability in Nasdaq and global tech markets

If IT spending revives and AI integration becomes an opportunity rather than a threat, sentiment could improve. However, sustained weakness in client budgets may keep pressure on valuations

Conclusion

TCS shares have entered a deep correction phase, falling 44% from their August 2024 peak and hitting a five-year low. AI disruption fears, global tech weakness, and cautious investor sentiment have combined to trigger sharp selling across the IT sector.

While panic selling may not be advisable, near-term risks remain elevated. Much will depend on how Indian IT companies adapt to AI transformation and whether global technology spending rebounds.

For now, investors should brace for continued volatility while closely monitoring earnings guidance and macroeconomic signals.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.