Indian IT Stocks Tumble as Analyst Report Predicts AI Will Replace Outsourcing Model

2026-02-24 economy

Mumbai, Tuesday, 24 February 2026.
Indian technology shares plunged after Citrini Research warned the sector’s outsourcing model is becoming obsolete. The report argues AI coding agents have collapsed the cost of development to merely the price of electricity, predicting accelerating contract cancellations through 2027.

Market Reaction and the Viral “Thought Exercise”

The immediate catalyst for the downturn was a sharp decline in the NSE Nifty IT Index, which fell as much as 5.3% on Tuesday, marking its most significant single-day drop since August 2023 [1]. Major industry players, including Tata Consultancy Services Ltd., Infosys Ltd., and Wipro Ltd., saw their shares slide by more than 3% each in Mumbai trading [1]. This volatility tracks a broader selloff in the United States technology sector, but the specific pressure on Indian equities stems from a viral report by Citrini Research titled “The 2028 Global Intelligence Crisis” [1][2]. Described explicitly as a “thought exercise in financial history from the future,” the report outlines a scenario where the rapid adoption of agentic artificial intelligence renders the traditional labor-arbitrage model of IT outsourcing economically unviable [2][6]. While the document presents a fictional timeline, its release has amplified genuine investor fears regarding the sector’s long-term durability [1].

The Economics of “Ghost GDP” and Coding Costs

At the heart of the bearish thesis is the argument that the marginal cost of coding is collapsing to match the cost of electricity, effectively eliminating the competitive advantage of human developers [5]. The Citrini report introduces the concept of “Ghost GDP,” a phenomenon where AI-driven automation boosts corporate margins and productivity metrics while simultaneously displacing white-collar employment and eroding consumer demand [2][4]. According to this analysis, as agentic coding tools improve, enterprise clients may accelerate contract cancellations with Indian service providers through 2027, opting instead for internal AI solutions [1][5]. This potential shift threatens a critical pillar of the Indian economy; the IT services sector exports over $200 billion annually and serves as the primary offset to the nation’s persistent trade deficit in goods [5].

Analyst Downgrades and Skepticism

The pessimistic sentiment has transcended viral internet theories, finding traction among institutional analysts. Jefferies has cast doubt on the future revenue streams of Indian IT giants, issuing price targets up to 33% lower than current trading levels [7]. The firm suggests that the efficiency gains from AI could squeeze the revenue models of companies like TCS and Infosys [7]. However, not all market observers accept the doomsday narrative. Deepak Shenoy, a noted market expert, dismissed the extreme predictions as “mostly fake,” characterizing the AI-driven panic as a spectacle rather than a fundamental reality [6]. Critics of the Citrini report argue that it relies on “wishful conclusions” and fails to account for institutional inertia or potential policy interventions that could slow such a drastic economic transition [7].

Future Implications for the Rupee and Employment

The Citrini simulation paints a stark picture of the potential macroeconomic fallout if these fears materialize. The scenario envisions a future where the Indian rupee could depreciate by 18% against the US dollar within a four-month window as the services surplus evaporates [5][7]. In this hypothetical timeline, the economic strain becomes severe enough to trigger preliminary discussions with the International Monetary Fund by the first quarter of 2028 [5]. While these figures represent a simulated “nightmare scenario” rather than a current forecast, they highlight the high stakes involved in the “atoms vs. bits” debate [4]. As India positions itself as a manufacturing hub to diversify its economy, the IT sector’s vulnerability to AI disruption remains a pivotal concern for global investors assessing the durability of the country’s service export model [4].

Sources

Artificial Intelligence Emerging Markets