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India's information technology (IT) sector, long perceived as a potential casualty of the artificial intelligence disruption, may instead be emerging as a structural beneficiary of the AI transition, according to a recent report by Jefferies.
The report notes that while Indian IT services companies were initially viewed as vulnerable to automation-led revenue compression and white-collar job displacement, recent developments suggest a more nuanced trajectory. In particular, rising enterprise AI adoption and the deployment of customised, company-specific models are reshaping the opportunity landscape. A key development highlighted is the tie-up between US-based AI firm Anthropic and Infosys to jointly build tailored AI agents for enterprise clients. The report says, "The above is clearly a positive from an Indian market standpoint since it means there may be a future for the Indian IT services sector which has been perceived as being a big loser from AI and which has been a big underperformer in an Indian stock market context and even more so in a global emerging market context." The collaboration underscores the growing demand for "small language models" trained on proprietary corporate data, an area where Indian IT firms are positioned to play an integration and migration role. It says "that corporates will develop so-called small language models for their specific use, with their own proprietary data bases, and the Indian IT service companies will play a role in migrating corporates to this new approach." Jefferies said this confirms its feedback gathered during recent investor interactions in India, where corporates indicated a preference for developing in-house, domain-specific AI solutions rather than relying solely on large, general-purpose models. Notably, AI adoption among large clients is already accelerating. Around 90 per cent of Infosys's top 200 customers are currently using its AI-related services, signalling that AI integration is moving from pilot projects to scaled deployment. Jefferies added that a stronger AI-led services pipeline reduces macroeconomic risks for India. The IT services sector employs about 5.8 million people, and concerns had mounted over potential job losses and multiplier effects on consumption if demand weakened sharply. However, the firm argued that the transition towards AI-enabled transformation services, including "AI First" offerings unveiled at Infosys's recent investor event in Bengaluru, expands the addressable market significantly. The opportunity for such AI-led services is estimated at USD 300-400 billion by 2030. In that context, Jefferies concluded that while Indian IT was initially perceived as a major AI casualty, recent developments, particularly enterprise AI adoption and custom model deployment, indicate that firms like Infosys may instead become key enablers of AI transformation, mitigating both valuation concerns and broader macroeconomic risks for India. (ANI)
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