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The Nifty IT index dropped over 2% to trade at 30,082 on Monday, leading losses among all the major sectoral indices on the stock market. Infosys, LTI Mindtree and Mphasis shares dropped around 3% each, while those of Tech Mahindra, OFSS, Coforge, HCL Technologies, Wipro, Persistent Systems and TCS fell 1-2%. US job growth accelerated sharply in August while the unemployment rate remained steady at 4.1%, implying an improvement in the labour market after recent struggles, data released on Friday showed. US nonfarm payrolls increased by 1.62 lakh in August, well above economists' expectations of a gain of 56,000. The sharp growth boosted hopes for a rate hike by the Federal Reserve in September, with traders now pricing in approximately 57% chance of a rate increase this month. Higher US rates could curb client spending, weighing on Indian IT firms that generate a significant share of their revenue from the United States. Also read | Is AI boom hiding growing US risks? Nomura warns dollar asset concentration leaves global markets vulnerable to AI shocks What lies ahead for IT stocks? IT stocks on Dalal Street have seen sharp upswings and downswings recently. Earlier this year, the sector witnessed a sharp selloff after breakthroughs by AI startups fuelled concerns about potential disruption to the traditional IT services business model. Later, a sharp selloff in global tech leaders proved to be a blessing in disguise for Indian IT stocks, which emerged resilient amid the global tech rout. HSBC said India can serve as an “anti-AI” diversifier as sharp swings in technology-exposed markets encourage foreign investors to broaden their portfolios. HSBC strategists Prerna Garg, Herald van der Linde and Yogesh Aggarwal said in a report that AI-rotation outflows from India have “largely played out.” While AI jitters continue to keep IT investors on the edge, CLSA downgraded several heavyweight stocks and revised their target prices, although it remains bullish on several mid-tier IT vendors. Indian IT has gone through a near three-year spending recession, on the back of weak discretionary budgets, elongated deal cycles, H-1B headwinds, AI driven revenue deflation and a selloff triggered by fears that agentic tooling (Claude Cowork, COBOL modernisation) would automate the legacy stack directly, Anand Rathi said in August. However, it thinks that fear inverts the actual set-up. “Our core thesis is that the AI cycle is pivoting from "building capacity" to "proving payback“ — a transition that is inherently services-heavy and plays squarely to Indian IT's strengths in deployment, integration, governance and legacy modernisation. Value is migrating from the layer that funds the AI build to the layer that deploys it: first to the enterprise software platforms — Systems of Record and Systems of Action that hold the data, permissions and approvals — then to the services firms that integrate and run them. This is the cloud playbook rerun: capex builds first and the returns arrive later, to different players, as railways, fibre and the 2015-19 cloud J-curve all showed,” it added. The brokerage feels near-term weakness is real, due to AI-led pricing deflation compounded by geopolitics. But AI is expanding the TAM, not compressing it, opening deployment, AI FinOps, governance, managed agent operations, legacy modernisation, sovereign AI and SLM pools, it said. “Indian IT offers this without the balance-sheet and funding-duration risk the infra layer carries — the "safe AI" trade,” it added. Also read | Bigger market crash ahead? Analysts weigh how Sensex, Nifty may react if US 10-year bond yield touches 5% (With inputs from agencies) Disclosure: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an investment advisor. Debaroti Adhikary does not hold any financial interest in the company named in the article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of the EconomicTimes Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. 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