AI worries push Nifty IT ETFs down as much as 21% in Feb, Nasdaq ETFs fall solely 5%: Right here’s why
“The Nasdaq includes {hardware}, platform and product-led expertise corporations which embody AI chip makers, cloud hyperscalers and software program product corporations which type the core of the AI worth chain. The highest tier AI worth chain corporations monetize instantly by IP possession, product gross sales, and platform economics translating into sturdy earnings and premium valuations,” stated Dhanshree Jadhav, Analyst – Expertise at Selection Institutional Equities.
Structural distinction between Nasdaq and Nifty IT:
However, the Nifty IT index is dominated by services-led IT gamers appearing as “integrators somewhat than creators” of AI, the analyst defined. “AI-led automation raises near-term issues round pricing strain, productiveness pass-through to shoppers, and slower income progress, as enterprises search to seize effectivity beneficial properties. This has weighed on progress visibility and valuations regardless of wholesome deal pipelines. The Indian IT sector is dealing with near-term headwinds as AI begins to disrupt the standard labor-arbitrage mannequin. The present divergence displays a broader shift in enterprise fashions, the place corporations proactively investing in AI-led platforms, options, and capabilities are higher positioned to navigate the evolving threat atmosphere,” Jadhav stated.
Ajit Mishra, SVP of Analysis at Religare Broking, stated that the divergence between the Nifty IT index and the Nasdaq‑100 Index largely displays their totally different positions within the evolving AI ecosystem. He additionally added that US expertise leaders view AI as a robust new progress platform. “Firms akin to Nvidia, Microsoft, and Alphabet Inc. are instantly monetizing AI by semiconductor management, cloud infrastructure, and software program ecosystems, positioning AI as a big income multiplier,” he added.
Indian IT corporations, nevertheless, largely function on a services-driven mannequin. Buyers concern that superior AI instruments might automate massive elements of coding, testing, and upkeep work, probably placing strain on billing fashions and margins, Mishra defined, including that sentiment weakened additional after Anthropic launched Claude Code, which triggered issues throughout the worldwide IT providers area and contributed to weak point in corporations akin to IBM.
What ought to traders do?
In response to Jadhav, this part needs to be seen as an industry-wide reset towards structurally stronger, AI-integrated working fashions somewhat than a everlasting structural drawback for Indian IT within the AI period.
“Whereas near-term strain is obvious, AI-led digital transformation might additionally create significant long-term alternatives for Indian IT corporations as enterprises speed up modernization. Buyers ought to intently monitor how these technological developments translate into deal pipelines and order flows within the coming months, although the sector could proceed to face strain within the close to time period,” Mishra, in the meantime, stated.
A number of widespread ETFs linked to the Nifty IT index, together with Nippon India ETF Nifty IT, HDFC Nifty IT ETF, ICICI Prudential Nifty IT ETF, Mirae Asset Nifty IT ETF, Kotak Nifty IT ETF, SBI Mutual Fund-SBI ETF IT, and Axis Nifty IT ETF, declined 20-21% in February, in line with knowledge on NSE.
Motilal Oswal Mutual Fund’s Nasdaq 100 ETF in the meantime, fell somewhat over 5% throughout the identical period. Motilal Oswal Nasdaq Q 50 ETF fell just one% throughout the identical month, regardless of AI worries.
(Disclaimer: Suggestions, options, views and opinions given by the consultants are their very own. These don’t symbolize the views of The Financial Occasions)
