Sensex, Nifty post moderate gains as IT stocks plunge over ‘SaaSpocalypse’

Indian equity markets registered modest growth during early trading on Wednesday, with gains spread across most sectors. However, IT stocks faced pressure due to concerns dubbed the “SaaSpocalypse,” driven by advancements in artificial intelligence.

Shares of Indian IT companies declined following negative trends in U.S. markets, reflecting heightened competition and margin pressures linked to AI developments. The sell-off came after Anthropic introduced a new AI-powered legal tool for its Claude chatbot.

At 9:25 am, the Sensex rose by 44 points (0.05%) to 83,783, while the Nifty climbed 51 points (0.20%) to 25,778. Broader market indices showed muted movement, with the Nifty Midcap 100 up 0.04% and the Nifty Smallcap 100 rising 0.01%.

Most sectoral indices traded positively except IT and realty, which fell 5.39% and 0.58% respectively. Notable outperformers included auto (+1.12%), metal (+1.38%), consumer durables (+1.05%), and oil & gas (+1.77%).

Market analysts identified immediate support for Nifty at 25,550-25,600 and resistance at 25,850–25,900. They cautioned that the recent market rally, fueled by optimism about a U.S.-India trade agreement, might struggle to maintain momentum amid growing IT sector uncertainties.

The sell-off in U.S. software stocks—some plunging up to 25% following Anthropic’s AI announcement—raised concerns for Indian IT firms, which provide significant services to American companies. Financial firm Jefferies characterized the event as a “SaaSpocalypse.”

Analysts noted that high valuations across most sectors lack fundamental support for sustained rallies. Markets expect the Reserve Bank of India to maintain current rates during its February 6 policy meeting. Thursday’s rally was largely attributed to foreign institutional investor (FII) short-covering, with export-oriented sectors like textiles, apparel, gems, jewelry, and marine products anticipated to see continued activity.

Asian markets displayed mixed trends: China’s Shanghai Composite was flat while Shenzhen fell 0.88%. Japan’s Nikkei lost 0.60%, Hong Kong’s Hang Seng declined 0.73%, and South Korea’s Kospi rose 0.72%. In the U.S., the Nasdaq dropped 1.43%, the S&P 500 declined 0.84%, and the Dow Jones fell 0.34% in the previous session.

On February 3, FIIs recorded net equity purchases of ₹5,236 crore, while domestic institutional investors bought ₹1,014 crore worth of stocks.

(With inputs from IANS)