The sharp selloff in Indian IT stocks amid renewed artificial intelligence concerns has exposed a deeper problem — an industry increasingly trapped by short-term thinking.
Samir Arora, Group CIO and Fund Manager of Helios Capital, summed it up bluntly in a recent post on social media platform
His comments come as Infosys, Tata Consultancy Services (TCS), HCL Tech and other IT stocks cracked up to 8% on Wednesday and continued to trade with cuts today (Thursday) as fears that Anthropic’s new plug-in could automate tasks traditionally outsourced to Indian IT services, raising doubts about the sustainability of the human-intensive business model.
“As I have said many times here, Indian IT companies cannot see beyond their nose – they only worry about next quarter’s orders and guidance, and if there is visibility for that, they feel confident,” said Arora.
This mindset is increasingly destructive amid the fast-changing world of global tech following the back-to-back disruptions caused by the new AI tools.
His criticism comes at a time when analysts were celebrating buybacks as a positive for the sector. Just days ago, buyback announcements were being framed as shareholder-friendly moves that would marginally improve post-tax returns under new regulations.
Arora pointed out a mismatch in scale and relevance in the way Indian IT and global tech giants function by juxtaposing the market reaction to taxation changes in buyback against the capex announcement by Google.
“Imagine that 3 days ago, analysts were celebrating the fact that buybacks are a big positive for the industry – at the same time, Google announces that their capex budget can double to USD 175 billion in one year, and our fellows are celebrating that there will be approx. 0.6 pct saving in taxes due to new buy back rules ( on 3 pct odd dividend yield now coming in via buy backs),” Arora said.
The message from the IT selloff suggests that buybacks and short-term capital return stories may cushion sentiment temporarily, but do little to address the strategic question confronting Indian IT — how to stay relevant when global tech spending priorities are being radically reshaped by AI.
Arora stresses that earnings do not need to change dramatically in one year for stocks to correct sharply. Valuations, however, can “change in a jiffy”.
Vikas Khemani, founder of Carnelian Asset Management, and a well-tracked market voice, agreed with Arora. He said it is time to wake up, especially for promoters who have “preached government about R&D”.
Khemani argued that it’s time to put the money where your mouth is. “People like Mr Narayan Murthy, who have preached government all along their life to invest in R&D has not done anything for R&D despite having billions at their disposal. If nothing else, they should have created/invested every year 2% of their profit in venture funds (internal or external)… this wouldn’t compromise their profits, but money which earns 5% in treasury will get to innovation. Have wondered why these stalwarts have never done it!!!! It’s never too late,” Khemani opined.
IT company managements not solely at fault
Arora also turned the lens inward, blaming not just managements but the broader market ecosystem. “It is also the fault of all of us,” he wrote.
Indian markets, he argued, have little patience for experimentation. Promoters are often criticized for investing even their own private capital into new ideas—whether personal flying machines or health technology ventures.
Loss-making businesses are routinely mocked, regardless of what they may be building in the interim. Investors and commentators admire fund managers who proudly declare that they “don’t buy loss-making companies”.
Arora quipped, “With everyone focused solely on cash flows in the immediate term, what can managements also do.”
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.
