The Indian equity markets showed moderate gains on Wednesday morning, with various sectors experiencing growth, although IT stocks faced losses attributed to the impact of AI-driven ‘SaaSpocalypse.’ Indian IT stocks dropped following negative cues from Wall Street, driven by increased competition and reduced margins due to advancements in AI technology, notably after Anthropic introduced a legal tool for its Claude AI chatbot. The Sensex rose by 44 points to 83,783, and the Nifty increased by 51 points to 25,778 as of 9.25 am.
Main broad-cap indices recorded modest gains, with the Nifty Midcap 100 rising by 0.04% and the Nifty Smallcap 100 by 0.01%. While most major sectoral indices showed positive trends, IT and realty sectors experienced declines of 5.39% and 0.58%, respectively. Conversely, Nifty auto, metal, consumer durables, and oil and gas sectors saw gains of 1.12%, 1.38%, 1.05%, and 1.77%, respectively.
Market analysts highlighted that immediate Nifty support levels are at 25,550-25,600, with resistance at 25,850–25,900. They also expressed concerns about the sustainability of the rally driven by the US-India trade deal, especially in light of the recent IT selloff in the US that could impact the Indian IT index. Analysts noted the significant role of India as a software service provider for US companies and the potential implications of the recent Anthropic AI launch, which led Jefferies to term it a “SaaSpocalypse.”
Looking ahead, market watchers cautioned that despite the recent rally, high valuations across sectors may not be supported fundamentally for a sustained uptrend. They also anticipated that the upcoming monetary policy meeting on February 6 would likely maintain unchanged interest rates. The recent rally, fueled by FII short covering, particularly benefited sectors poised to gain from exports to the US, such as textiles, apparels, gems and jewellery, and marine processing.
In Asian markets, China’s Shanghai index remained stable, Shenzhen eased by 0.88%, Japan’s Nikkei declined by 0.6%, Hong Kong’s Hang Seng Index edged down by 0.73%, and South Korea’s Kospi added 0.72%. The US markets closed mostly in the green during the last trading session, with Nasdaq down by 1.43%, the S&P 500 by 0.84%, and the Dow Jones by 0.34%. On February 3, foreign institutional investors (FIIs) net bought equities worth Rs 5,236 crore, while domestic institutional investors (DIIs) were net buyers of equities worth Rs 1,014 crore.
