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India, the First Country Shorted by AI

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The capital markets have spoken loud and clear: Global investors are systematically bearish on a country's key industry.

Original Title: "India, the First Country Shorted by AI"
Source: DeepWave TechFlow

52-year-old Indian engineer Shiv has maintained a habit to this day: sending out at least 5 resumes every day.

This determination began in April this year. In March, the American software giant Oracle laid off 12,000 people in India, and he was one of them. Having worked at this company for 14 years, he thought he would work there until retirement. Now, he still has to pay a monthly rent of 50,000 rupees, his family has been living in the same house for 15 years, and he doesn't want his family to move. One evening, he found himself unreasonably snapping at his wife.

During an interview with India's Outlook magazine, he said, "Technology is what we built, we learned it, we developed it. After we used it, they let us go."

Also among those laid off was 25-year-old Priyanka. That morning, as she got ready to go to the gym, she absentmindedly checked her email and received a cold notification that she was fired. She had two installment payments to bear, one for an iPhone and one for an electric scooter, totaling 20,000 rupees per month. She was dipping into her savings just to stay in Bangalore.

Zooming out, behind Shiv and Priyanka is an unprecedented national-level short-selling settlement, and the targeted country is India.

The World's Purest AI Short Target, in Mumbai

If you were to find a trading target in the global market that could most purely express the narrative of "AI replacing white-collar workers," the answer lies both on the Nasdaq's long list and the Mumbai exchange's short list. The former is NVIDIA, and the latter is India's Nifty IT Index.

Looking at the trend of this index in 2026 is like reading a meticulously executed judgment.

The Nifty IT Index hit a historical high of 46,089 points on December 13, 2024, and by the end of June this year, it had retraced by 43%.

In the first half of 2026, this index fell by about 30%, making it the worst-performing sector in the Indian market, while during the same period, the Nifty 50 main index only fell by about 9%. TCS, Infosys, Wipro, LTIMindtree, the four major IT giants in India, have each retraced about 50% from their peak values, with a total of about 1.928 trillion rupees in market capitalization evaporated by the top ten IT companies, equivalent to over $200 billion. TCS alone has seen its market value drop below the 10 trillion rupees mark.

What's even more intriguing is the pace of the decline. Almost every large bearish candle seems to align with a major AI company's event in the U.S.

On February 4, Anthropic unveiled a new generation of programming tools, claiming to automate most of the exploration and analysis work involved in legacy system modernization. The modernization of COBOL systems has been a bread-and-butter business for the Indian outsourcing industry for decades. The news reached Mumbai, triggering a sell-off in the IT sector, leading to a cumulative drop of over 15%, wiping out 5.08 trillion rupees in market value.

In May, OpenAI announced a commitment of over $4 billion to establish a "Deployment Engineering" team that would directly engage with enterprise clients to reshape AI workflows. The market immediately understood the implications: high-value consulting, deployment, and transformation projects that could potentially bypass Indian service providers. In response, Nifty IT plunged to its lowest level since May 2023.

In June, Accenture experienced a nearly 18% freefall in a single day, marking its largest intraday percentage drop since going public. The next day's opening in Mumbai saw Nifty IT plummet by 6%, with Infosys plunging 8.19% to a five-year low in a single trading session, evaporating 1.35 trillion rupees in market capitalization. Ironically, the clients served by Accenture are precisely the same European and American banks, retailers, and manufacturers that Indian IT firms cater to.

Sentiment among sellers is also shifting.

Investment bank Jefferies warned that Indian IT stocks could still have a downside of 30% to 65% in a worst-case scenario. Citrini Research's report anticipates that contract cancellations at TCS, Infosys, and Wipro will accelerate until 2027. Domestic brokerage firm Nirmal Bang downgraded TCS from a buy to a sell rating, slashing the target price from 3,046 rupees to 1,693 rupees.

Bloomberg data reveals that the cumulative weight of the top five IT companies in the Nifty 50 has dropped below 7.6%, hitting the lowest level since 2002. The capital markets have made a resolute judgment: Global investors are systematically bearish on a country's core industry.

The Essence of the Indian Model: Wholesale of Junior Engineers to the World

To understand why India has been hit hardest in the AI era, one must first grasp what exactly the Indian IT industry is selling.

The answer is quite simple: Engineer hours billed on an hourly basis.

The Y2K crisis at the turn of the last century gave India its first taste of gold, and in the three decades since, this model has only grown bigger. Clients in New York or London, code written in Bangalore or Hyderabad, the same work, but the Indian engineers' rate is a fraction of their American counterparts'. Labor arbitrage is the entire secret on which this $283 billion industry thrives.

This model has created an unprecedented class within India. Neeti Sharma, CEO of TeamLease Digital, summarized it well to Outlook: "The logic is simple—you take a loan of four to five hundred thousand rupees, complete an engineering degree, join TCS, Infosys, or HCLTech, and you're set for life."

An engineer named Pooja is a perfect example of this logic: she grew up in a single room on the outskirts of Kolkata, where nearly 70 people shared one bathroom. After graduating in 2005, she became a programmer in Gurgaon, starting at a salary of 7,056 rupees per month. Today, she earns an annual salary of 3.5 million rupees at a top IT company.

A joint study by Nasscom and Crisil showed that by 2007, each IT job could create around four jobs in other sectors of the economy—drivers, security guards, cooks, domestic help, and more. The contribution of housing loans to India's GDP has risen from 0.6% in 1995 to about 11% today, with 35% concentrated in the IT hubs in the south. The entire real estate market in Bangalore and Hyderabad relies heavily on the salaries of IT professionals.

The problem is, the product this model sells has a precise name: repetitive labor of junior and mid-level engineers.

Writing template code, manual testing, maintaining legacy systems, handling service tickets... And the grand model happens to be the perfect substitute for this type of labor. It is a junior engineer with marginal cost close to zero, working 24/7, who will never get a visa but also never needs one.

In 30 years, India has built itself into the world's largest "alternative to American programmers." What is now ending it is something even cheaper—an "alternative to Indian programmers," AI.

The boy who was supposed to slay the dragon did not turn into a dragon but was instead swallowed whole by a new dragon.

The Middle-Class Decade Script, Torn Apart in Three Years

A collapse is already accelerating.

Last July, TCS announced a 12,000-employee layoff, representing 2% of its workforce, the largest in the history of India's largest private employer. A 45-year-old Kolkata-based employee told Reuters, "This is devastating news, and at my age, finding a new job is too difficult."

Even more absurd is the fact that over 500 job seekers who received offers from TCS with a joining date of July 2025 are still indefinitely waiting to onboard, with many having already resigned from their previous jobs.

Beyond the layoffs is the stalling of the recruitment engine.

India's top five IT companies had a net reduction of about 7,000 employees in the fiscal year ending March 2026, compared to a net addition of over 12,000 employees the previous year. Over the past five years, these five companies hired an average of about 230,000 employees annually, but in FY26, this number dropped to 170,000. TCS's campus recruitment program has been slashed from an annual average of 40,000 over the past three years to 25,000.

Gaurav Vasu, the founder of market intelligence firm UnearthInsight, estimates that in the next two to three years, 400,000 to 500,000 IT professionals will face the risk of layoffs, with 70% of them being mid-level employees with 4 to 12 years of experience.

Fund manager Saurabh Mukherjea has calculated an even larger figure: India produces about 3 million engineering graduates annually, with around 1.5 million considered "qualified engineers." Until 2020, almost all of these 1.5 million individuals were absorbed by the IT services industry. However, in the past three years, this number has dropped to nearly zero. At the same time, Azim Premji University's "2026 India State of Employment Report" shows that the unemployment rate for 15 to 25-year-old graduates is as high as 40%.

The shockwave is reverberating along the path where wealth was once distributed.

In the first quarter of 2026, residential sales in major Indian cities saw a 13% year-on-year decline, with analysts directly attributing the IT layoffs as one of the main reasons. Co-living spaces in Bengaluru suddenly have vacancies, and landlords are holding IT companies accountable. Mukherjea also observed a concerning sign: a large number of individuals anticipating being laid off are preemptively applying for personal loans and mortgages, with a portion of the loan growth in India over the past 12 months coming from these "doomsday loans."

So, what about leaving India to work in the United States?

Sorry, that door is also slowly being sealed shut in Washington.

In September 2025, the Trump administration temporarily raised the H-1B visa fee from $5,000 to $100,000, a 20x increase. Two months prior to this, Trump publicly called on Google and Microsoft to "stop recruiting in India."

In 2024, Indians took away over 200,000 U.S. job visas, with Indian companies accounting for 20% of all approved H-1B visas. This channel was once the extension of the Indian IT model into the physical world.

Around 60% of India's IT industry revenue comes from the U.S. market, amounting to nearly $135 billion. Now, India faces a double strangulation structure. AI has enabled U.S. companies to have, for the first time, the technological option of "service repatriation," no longer needing to outsource work to Bangalore; the new visa policy ensures that Indian engineers also find it challenging to send themselves to the U.S.

People can't leave, and work can't come in.

Even more frightening is that the AI-driven reckoning is still ongoing.

India's median age is only 28 years, and over the next 20 years, millions of young people will enter the labor market every year.

The demographic dividend is a check with an expiration date. If cashed, India will be the next great power; if not, the same group of young people will move from the left side to the right side of the balance sheet.

A speck of gray from the times falling on an individual's head can become a mountain. Shiv still applies to his 5 jobs every day, the offices in Bangalore are still brightly lit, but the people in the buildings are beginning to seriously contemplate for the first time how long those lights can stay on and for whom they are shining.