Indian information technology stocks have come under sustained pressure amid global uncertainty, slowing discretionary spending, and mounting concerns that artificial intelligence could cannibalise traditional outsourcing revenue. However, Standard Chartered Securities argues that the sector is undergoing a familiar cycle of disruption and reinvention rather than facing structural obsolescence.

Speaking at a market outlook event in Mumbai, Chief Investment Officer Gaurav Dua advised investors not to rush into exits solely because of short term volatility. His view rests on the historical resilience of the IT services industry, which has repeatedly adapted to technological shifts over the past three decades. According to Dua, investors currently holding IT stocks should remain patient, as future rallies could provide more favourable exit opportunities if portfolio rebalancing is required.

The brokerage has maintained a neutral stance on the sector rather than an overweight position. This cautious positioning reflects both near term uncertainty and the expectation that outcomes will vary widely across companies. Dua indicated that portfolio adjustments would be selective. Stocks perceived as structurally weaker may be trimmed when market conditions permit, while companies better positioned for the next technology cycle could see increased allocation.

The current disruption is being driven by artificial intelligence, which is expected to automate routine coding, testing, and maintenance work that historically formed a large portion of offshore IT contracts. Dua acknowledged that AI will likely replace some low value tasks. However, he emphasised that this does not necessarily translate into reduced long term demand for software services.

Instead, AI could accelerate technology modernisation across global enterprises. Companies that were previously slow to upgrade legacy systems may now be forced to adopt new platforms to remain competitive. This shift could trigger a fresh investment cycle in cloud migration, data architecture, cybersecurity, and AI integration services.

The CIO pointed out that such transitions are not unprecedented. Following the Y2K remediation wave and the dot com bust, Indian IT firms moved away from basic application development and maintenance toward enterprise software implementation. When that segment matured and pricing pressures intensified, the industry pivoted again toward infrastructure management, quality assurance, and later digital transformation initiatives powered by cloud and mobility.

Each transition reshaped the competitive landscape. Some firms successfully evolved their capabilities, while others stagnated or were consolidated. Dua suggested that the AI era will similarly produce both winners and losers, depending on the speed of adaptation, investment in talent, and ability to develop domain specific solutions.

A key area of opportunity lies in building customised AI applications tailored to business processes. While foundational models are generic, enterprises require specialised systems integrated with existing workflows. Developing, deploying, and maintaining such solutions could create a new revenue stream for IT service providers. Dua described these as purpose driven AI agents designed for specific operational tasks, where human expertise in implementation remains essential.

Despite the long term optimism, the transition may be uneven. Companies could face pricing pressure, delayed decision making by clients, and margin volatility as revenue models evolve. The brokerage expects a period of adjustment before growth stabilises.

Beyond sector specific commentary, Standard Chartered Securities also outlined its broader portfolio strategy. The firm advocates a balanced allocation across large, mid, and small capitalisation stocks, combining macro driven sector positioning with bottom up stock selection. According to Dua, understanding the stage of the economic cycle helps identify industries with structural tailwinds versus those facing cyclical headwinds. Once this top down framework is established, more granular stock picking can refine returns.

A smaller portion of portfolios may be allocated to higher risk opportunities in the broader market, particularly in small caps where company specific factors dominate performance. However, the emphasis remains on diversification rather than concentrated bets.

The perspective shared at the event aligns with recent commentary across the investment community that IT stocks are confronting both cyclical slowdown in global spending and structural change from emerging technologies.