Nifty IT index slumps 3% as OpenAI announces launch of Deployment Company

Nifty IT index has fallen nearly 25 per cent year-to-date, compared with an 8.85 per cent decline in the benchmark Nifty50

Shares of information technology (IT) stocks came under pressure on Tuesday, May 12, following OpenAI’s announcement to launch the OpenAI Deployment Company—a new entity aimed at helping organisations build and deploy AI systems for critical operations.

 

The Nifty IT index, which tracks the performance of 10 major IT stocks, plunged 3.33 per cent to an intraday low of 28,351 as investors expressed growing concern over OpenAI’s move from being a software provider to a “full-service consultant, potentially encroaching on the domain of India’s IT majors. The index has fallen nearly 25 per cent year-to-date, compared with an 8.85 per cent decline in the benchmark Nifty50.

 

 

At the last check, Nifty IT was trading at 28,472, down 2.92 per cent, with Persistent Systems, Infosys, and Tata Consultancy Services leading the losses, all down over 3 per cent. Other constituents, including Coforge, Wipro, HCL Technologies, Tech Mahindra, and LTIMindtree, fell over 2 per cent, with losses extending up to 2.86 per cent. Mphasis declined 1.95 per cent, while Oracle Financial Services Software was down 0.96 per cent on the NSE.  CHECK Stock Market LIVE Updates

OpenAI Launches Deployment Company

OpenAI said the OpenAI Deployment Company will assist organisations in building and deploying AI systems that generate tangible operational impact.  “Successful AI deployment is about empowering people and teams to do more. The OpenAI Deployment Company will extend OpenAI’s ability to embed engineers specialized in frontier AI deployment, known as Forward Deployed Engineers (FDEs), into organizations working on complex problems in demanding environments. These FDEs will work closely with business leaders, operators, and frontline teams to identify where AI can make the biggest impact, redesign organisational infrastructure and critical workflows around it, and turn those gains into durable systems,” said the company. 

While attributing ETH fall to OpenAI’s latest enterprise push, Ravi Singh, chief research officer at Master Capital Services, said that the biggest concern is that AI platforms are now becoming capable of handling a lot of repetitive work — from coding and testing to support and workflow automation — which has historically been manpower-driven for Indian IT companies. That, he believes, naturally raises concerns around future hiring, billing growth, and pricing power, especially in low-complexity outsourcing work.  "Markets are worried that if companies increasingly shift toward AI-led solutions, spending on conventional IT services could slow gradually over time. That said, the market reaction also seems a bit emotional in the short term. Large IT firms are already investing aggressively in AI, building their own tools, and partnering with global AI platforms to stay relevant in the next phase of technology spending, said Singh.    He, however, believes that while the near-term sentiment may remain weak, this appears more like an industry transition than a long-term threat to the sector itself. 

 

Technical view

From a technical perspective, the Nifty IT index, Harish Jujarey, AVP, Head - Technical Equity Research, Prithvi Finmart, said, has slipped to a two-year low and is now down nearly 25 per cent on a YTD basis. The immediate support for the index, he said, is placed near the 28,288 zone, which marks the March swing low. A decisive breach below this level could drag the index, he believes, further towards the 2023 lows of around 26,184.

 

Major IT heavyweights such as Tata Consultancy Services, Infosys, and HCL Tech continue, Jujarey said, to remain in a broader downtrend, reflecting sustained weakness in the sector.

 

"However, after the recent sharp correction, both the index and frontline IT stocks have entered oversold territory on technical indicators. While the broader trend remains weak, the possibility of a short-covering rally in the short to medium term cannot be ruled out," said Jujarey.

 

Jigar S Patel, senior manager - technical research analyst, Anand Rathi Shares and Stock Brokers, on the other hand, said that the index has breached the major yearly support zone of 31,000, which earlier acted as a strong resistance in the previous month. Additionally, the index is currently trading near the 50 per cent retracement of the rally witnessed from the COVID lows till the 2024 highs.

 

Considering the confluence of these technical levels, Patel expects Nifty IT to gradually form a base in the 29,000–26,000 zone over the coming few weeks.

  ============================ 

(Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.)