IT sheds weight in indices as AI rises

Combined weight of IT cos in BSE Sensex down to 18-year low

- Jas Bardia & Dipali Banka

India’s $283-billion information technology (IT) sector is no longer the big hitter in its leading stock market indices, reflecting the industry’s continued struggle to navigate artificial intelligence (AI), automation, and enduring labour mobility hurdles in the US.

The combined weight of IT companies in the BSE Sensex has plummeted to an 18-year low, Bloomberg data shows, while their share in the broader Nifty 50 index languishes at a decadal trough. IT stocks now command just 11.3% of the Sensex weight, the lowest level since falling to 8.8% in 2007. Four of the top five IT stocks figure in the Sensex, Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd, and Tech Mahindra Ltd; Wipro Ltd, once a stalwart, was removed from it last year.

The recent slide has aligned with the November 2022 launch of OpenAI's ChatGPT, an event seen as an inflection point for the sector. Along with the relentless rise of automation and persistent visa issues constraining labour mobility in the US, it has upended traditional business models, slowed revenues and moderated stock prices, ultimately lowering their index weights. The steep decline marks a significant erosion from a late-2021 peak, when IT stocks constituted about 18.56% of the Sensex.