Will SaaSpocalypse hammer Indian tech stocks?

Saaspocalypse to spread to India?

“Saaspocalypse” is rippling through – and toppling – a wide swathe of the software, advertising and publishing shares. From Mag-8s to the entire advertising industry, investors are fleeing sectors that are (vaguely) threatened by AI. 

Microsoft, for example, is still falling like a rock. At this rate of decline, the MSFT share price will soon test the 2025 lows (see below).

But while US and European software companies are plunging non-stop, one less-discussed area is the Indian IT sector.

Will this $300 billion tech sector crater in the Age of Generative AI and AI Personal Assistant (eg OpenClaw)? Or do Indian tech outsourcing companies have a better moat than most US software techs?

When AI leaders gathered in India last week for the annual AI Impact Summit 2026, the mood was mixed. According to The Economist (16 Feb):  

India is using the event to hype itself as an emerging AI superpower, alongside America and China. In many ways that is fanciful. India has little aptitude in advanced manufacturing and cannot produce the chips on which AI depends.

Right now, advanced computer chips or Large Language Models LLMS are rarely built by Indian companies. But this is not to say that India cannot participate in the AI boom. Pulling investments to build data centres in the country is a popular choice. Writing in the same issue, The Economist then pointed out this potential:

Data centres are rapidly appearing across the country. Its installed capacity reached 1.3 gigawatts ( GW) last year……That may be small compared with America (38.7GW) or China (9.5GW), but is nearly triple the figure from 2020.…the Adani Group, an Indian conglomerate, announced it would pour $100bn into data centres by 2035…..America’s hyperscalers increasingly treat India as a hub for training and running AI models. Alphabet is spending $15bn on a data-centre cluster for AI in southern India. Microsoft has said it will invest some $20bn in AI infrastructure in the country over the next few years.

One of the reasons for this optimism is cost. The US data grid is crowded; electricity prices are set to increase due to mammoth demand. India, on the other hand, provides cheap power (at least when converted to USD). The Indian-USD exchange rate is depreciating against the USD. 

Moreover, the country has 900 million internet users – nearly 3x the US. The social, financial, and consumer data emanating from this population set will be extremely valuable to global tech companies. (No Great Fire Wall) These datasets have to be stored locally. Thus, ensuring good long-term demand for Indian data centres. 

Lastly, tax holidays, intra-state incentives and low labour costs are all further plus points to build data centres in the country to serve the wider world. Not to forget the demand for AI will increase globally, including in India. In other words, there are many positive points to invest heavily in Indian data centres.

India’s AI Investment Is Lagging Behind

However, in the world of ‘Eat lunch or Be Lunch’, Indian tech companies have lots of catching up to do. 

Whereas China’s AI ecosystem now comprises AI Tigers (eg DeepSeek, MiniMax), advance Humanoid robotics, drones (eg, DJI) and chip manufacturing, India’s equivalent companies are less well known. 

Manufacturing is one of India’s weak points. To build these massive state-of-the-art data centres, there is a host of supply chain issues that need to be ironed out. From transformers (long lead time) to grid connection to power stability – these factors may hamper the rapid construction of data centres in India. 

It is not surprising that out of the Top 10 Data Centres in the world right now, half of them are in the US, another 3 in China and 1 in the UK (see below). 

Source: datum.co.uk (2025) 

Moreover, AI (more specifically, Agentic AI) will also erode some of the competitiveness of the current Indian tech groups. The power of these new AI programs is that they can ‘disintermediate’ existing software applications by inserting a layer of hyper-effective AI Agents. 

In other words, SaaS is about to become ‘AI as a Service” (AIaaS). The world tech is about to endure a period of seismic shifts in which current working business models are being rendered obsolete.

Source: AlixPartners

India Info-Tech Charts

Against this backdrop, what is the market’s take on Indian tech stocks?

Below, I show the charts of the top four Indian IT groups (constituents in SENSEX index)

Tata Consultancy Services – underperforming the wider market for some time. Downtrend broke beneath major support at 3,000 for the first time since 2021.

Infosys – slumped into major support band at 1,300-1,400. This suggests a top-heavy pattern and may lead to a wave of selling if the floor fails to hold.

HCL Tech – while the IT stock performed better than its larger peers, prices have regressed back to its uptrend support trendline. A break of this support indicates a loss of upward momentum. Further lateral support noted at 1,300.

Tech Mahindra – reverted to its multi-year uptrend support. Given prices haven’t really made new all-time highs since 2022, it shows that the cyclical trend has flattened. A break of the support at 1,200-1,300 may lead to a swift test of major support at 1,000.

So, should you invest in Indian tech stocks?

Indian software stocks appear to be following the trajectory of many US IT stocks: prices are heading down. The risk for this sector is that, until investors figure out how current companies can use Agentic AI to boost their revenue streams, they may sell first and then weigh their options from the outside.

These Indian tech firms had enjoyed a multi-year secular bull run on the global outsourcing trend. But that business trend appears to be changing rapidly. So making the essential pivot to the new AI world is imperative.

Long-term investors may wish to reserve some capital to invest in new AI tigers when they emerge in the shifting landscape.