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Indian IT stocks saw their worst single-day fall since March 2020, with the Nifty IT index plunging over 7% and erasing nearly Rs. 2 lakh crore in market value. The selloff followed Anthropic’s launch of AI plugins for Claude Cowork, sparking fears that advanced AI could replace human-led outsourcing services.

Indian IT stocks witnessed their worst single-day crash since the March 2020 COVID-19 pandemic, with the Nifty IT index plummeting over 7 percent and wiping out approximately Rs. 2 lakh crore in market capitalisation within hours. This was reportedly due to new AI plugins introduced by Anthropic, that is offering serious threat to the IT industry, with some even calling it the 'end of outsourcing'.

Infosys, TCS, Wipro, HCL affected

The carnage was widespread and ruthless. Infosys and LTIMindtree led the decline, crashing nearly 9 percent and 8 percent respectively. Tata Consultancy Services (TCS), India's largest software exporter, saw its market cap erode by nearly Rs. 70,481 crore, while Infosys shed over Rs. 54,000 crore in market value. Tech Mahindra, Wipro, HCL Technologies, Persistent Systems, and Coforge all tumbled between 4 percent and 8 percent.

The selloff wasn't limited to India. Wall Street's tech-heavy Nasdaq fell 1.4 percent, with software stocks shedding approximately $280 billion in market capitalisation in just one day. Global giants were battered even harder—London Stock Exchange Group fell 13 percent, Thomson Reuters plunged 16 percent, and LegalZoom plummeted 20 percent. This is the first time an AI tool has caused so much panic globally.

What did Anthropic launch that is so scary?

The immediate trigger was an announcement from Anthropic, a US-based AI startup backed by Google and Amazon. The company unveiled plugin support for Claude Cowork, its AI-powered workplace assistant, along with 11 open-source plugins designed to automate complex professional workflows across legal, finance, marketing, sales, and data analysis functions.

What set this apart from typical AI announcements was the shift from AI as a productivity enhancer to AI as a direct replacement for human-led services. As one market analysis noted, the fear shifted from AI helping employees work faster to AI doing the work itself.

The legal plugin particularly spooked investors. This plugin can automatically review contracts, sort NDAs, flag risks, and check compliance issues, tasks that usually require legal teams, legal software, or outsourced service providers.

What is Claude Cowork and why does it matter?

Claude Cowork is Anthropic's agentic AI platform that goes beyond simple chatbots. The plugins bundle skills, connectors, slash commands and sub-agents so people can use Cowork as a specialist for specific roles, teams and companies.

The 11 plugins released at launch span critical business functions:

- Productivity: Manage tasks, calendars, and daily workflows.

- Enterprise Search: Find information across company tools and documents.

- Legal: Contract reviews, compliance checks, document screening.

- Finance: Journal entries, account reconciliations, financial statement preparation.

- Sales: Prospect research, deal preparation, sales process management.

- Marketing: Content drafting, campaign planning, launch management.

- Data: Analysis and visualisation.

- Customer Support: Query handling and issue resolution.

- Product Management: Feature planning and roadmap management

- Biology Research: Scientific workflow automation

- Plugin Create/Customise: Build and modify custom plugins

Unlike traditional software that requires detailed step-by-step instructions, you can simply say, "Audit these 50 contracts and tell me which ones expire next month," and it does the full task on its own.

Why is it a big threat to Indian IT firms

The panic wasn't irrational - it reflected deep structural concerns about the Indian IT industry's business model.

1.Revenue model under siege: Indian IT companies largely follow a labour-based model, earning based on the number of people deployed and time spent on projects. If one engineer using AI can do the work of many people, why would clients pay for large teams? This creates pressure on margins, deal sizes, and long-term growth expectations.

2. Entry-level talent pool threatened: Anthropic's advanced AI systems also threaten the entry-level talent pool at Indian IT firms by replacing routine development and testing tasks, which serve as training grounds for junior engineers.

3. Dependency concerns: As Indian enterprises integrate Claude for critical coding workflows, dependency on large vendor teams may decline, squeezing billable hours and margins, noted Systematix Group analyst Ambrish Shah.

The $283 billion Indian IT industry, which depends heavily on large-scale workforces to deliver client projects, now faces questions about its fundamental value proposition in an AI-driven world.

Market reaction: Is there a need to panic?

The reaction is divided on whether the market crash was an overreaction or a much-needed reality check.

TechARC analyst Faisal Kawoosa says that 'this is just the beginning'. He told Free Press Journal, "To simplify, Anthropic mow has plugins that bring it to the service landscape, meaning it has now agentic capabilities that can develop applications and interfaces just like the IT services companies do. Earlier it had only the core, sort of brain which was leveraged by IT developers, now it has acquired the developer capabilities by itself. So all the companies which are known as ‘wrapper’ companies, who develop the interfaces for enterprises to use APIs and other IT tools and resources, have this as a serious threat where their job gets overtaken by such capabilities of AI."

"It has sort of just begun. Even Elon Musk has similar ideas for the software industry for which he launched ‘MacroHard’ (the opposite of Microsoft), where he envisions not just offering applications to work on, but applications working autonomously for humans who need not to skill for any such applications," he added.

To put into perspective, Musk had earlier taken a jab at Microsoft CEO Satya Nadella by saying, "OpenAI is going to eat Microsoft alive."

Here are a few other reactions to the market crash.

The Rs. 2 lakh crore wipeout serves as a stark warning that the AI revolution has moved from experimentation to execution. Indian IT firms now face a critical juncture: evolve from being labour arbitrage providers to becoming architects of AI-integrated solutions, or risk becoming obsolete.