India, the first country to be shorted by AI

Written by: Shenzhen TechFlow

Shiv, a 52-year-old Indian engineer, has kept one habit until today: he sends out at least 5 resumes every day.

This obsession began in April this year. In March, the US software giant Oracle laid off 12,000 people in India, and he was one of them. After working at the company for 14 years, he thought he would stay until retirement. Now, he still has to pay 50,000 rupees in rent each month. His family has lived in the same house for 15 years, and he doesn’t want them to move away. One evening, he found himself snapping at his wife for no reason at all.

In an interview with India’s Outlook magazine, he said: “Technology is what we built. We learned it and developed it. After they use it up, they let us go.”

In the same round of layoffs was Priyanka, 25 years old. That morning, she got up to go to the gym and casually checked her email. An email—cold and clinical—told her she had been dismissed. She had two installment payments hanging over her: one for an iPhone and one for a small electric scooter, totaling 20,000 rupees to repay each month. She was tapping her savings just to keep herself in Bengaluru.

Zoom the camera out: behind Shiv and Priyanka is a rare national-level short-sell liquidation, and the country being shorted is India.

The purest AI short target in the world is in Mumbai

If you want to find a trading target in the global market that most purely captures the narrative of “AI replacing human white-collar workers,” the answer lies both on Nasdaq’s long list and on the Bombay Stock Exchange’s short list. The former is Nvidia; the latter is India’s Nifty IT index.

Look at how this index has moved in 2026—it's like a judgment being carried out point by point.

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

In the first half of 2026, the index fell by about 30%, making it the worst-performing sector across India’s whole market. Over the same period, the Nifty 50 large-cap benchmark fell only about 9%. TCS, Infosys, Wipro, and LTIMindtree—the four major IT giants in India—have each retreated by roughly 50% from their respective peaks. The combined market capitalization of the ten major IT companies has evaporated by about 19.28 trillion rupees, equivalent to more than 200 billion US dollars; even TCS’s market cap has fallen below the 10 trillion rupees threshold.

Even more intriguing is the cadence of the decline. Every big red candle almost lines up with a US AI company’s product release.

On February 4, Anthropic released a new generation of programming tools, claiming it could automate most of the exploration and analysis work involved in modernizing legacy systems. COBOL system modernization has been an iron-bowl business for India’s outsourcing industry for decades. The news reached Mumbai; the IT sector began to sell off. Since then, it has cumulatively fallen by more than 15%, wiping out 5.08 trillion rupees.

In May, OpenAI announced it would invest more than $4 billion to build a team of “pre-deployment engineers,” embedding directly with enterprise clients to rebuild workflows around AI. The market immediately read between the lines: in the future, high-value consulting, deployment, and transformation projects might bypass Indian service providers. The Nifty IT fell accordingly to its lowest level since May 2023.

In June, Accenture plunged by nearly 18% in a single day, marking its largest one-day decline since listing. The next day in Mumbai’s trading session, the Nifty IT fell 6%. Infosys dropped 8.19% in a single day to a five-year low, evaporating 1.35 trillion rupees in one trading day. The customers served by Accenture are precisely the same group of European and American banks, retailers, and manufacturers that Indian IT companies serve.

The sell-side’s stance is also shifting.

Jefferies, an investment bank, warned that in the worst-case scenario, valuation of Indian IT stocks still has room to fall another 30% to 65%. A report from Citrini Research expects contract cancellations for TCS, Infosys, and Wipro to continue accelerating until 2027. Local broker Nirmal Bang downgraded TCS directly from buy to sell, cutting its target price from 3046 rupees to 1693 rupees.

Bloomberg data shows that the combined weight of the top five IT companies in the Nifty 50 has fallen below 7.6%, the lowest since 2002. The capital markets have cast their vote with real money: global investors are systematically shorting a country’s pillar industry.

The essence of the Indian model: wholesaling junior engineers to the world

To understand why India is being hurt the most in the AI era, you first need to understand what exactly India’s IT industry is selling.

The answer is straightforward: engineer hours billed by the hour.

The Y2K crisis at the end of the last century gave India its first real windfall. Over the following three decades, this model kept expanding. Clients are in New York or London, while code is written in Bengaluru or Hyderabad. For the same work, Indian engineers charge only a fraction of what their American counterparts charge. Labor arbitrage is the entire secret that keeps this $283 billion industry running.

This model has created an unprecedented class within India. Neeti Sharma, CEO of TeamLease Digital, summed it up well for Outlook: “The logic is simple. You take out 400,000 to 500,000 rupees to finish an engineering degree, then join TCS, Infosys, or HCLTech—and you’re set for life.”

The experience of an engineer named Pooja is a perfect sample of this logic. She grew up in a single room on the outskirts of Kolkata. In the entire building, nearly 70 people shared one bathroom. After getting her diploma in 2005, she went to Gurgaon to work as a programmer, earning a starting salary of 7056 rupees per month. Today, she earns 3.5 million rupees a year at a top IT company.

A joint study by Nasscom and Crisil shows that by 2007, each IT job could drive about 4 jobs in other sectors of the economy—drivers, security guards, chefs, domestic helpers, and so on. The share of housing loans in India’s GDP rose from 0.6% in 1995 to about 11% today, with 35% concentrated in southern regions where IT hubs cluster. The entire real estate market in Bengaluru and Hyderabad is, almost entirely, staked on the paychecks of IT white-collar workers.

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

Writing template code, doing manual testing, maintaining legacy systems, handling tickets… and large language models are precisely the perfect substitute for this kind of labor. They are junior engineers with near-zero marginal cost, working 7×24 without rest; they are never granted visas—and also never need visas.

For three decades, India has built itself into the world’s largest force for “replacing American programmers.” What is bringing an end to it now is something cheaper that “replaces Indian programmers”—AI.

The boy who slayed the dragon did not become the dragon. Instead, he was swallowed whole by a new dragon.

A decade-long script for the middle class, ripped up in three years

A collapse is already accelerating into realization.

In July last year, TCS announced layoffs of 12,000 people, accounting for 2% of its total workforce— the largest round in the history of India’s largest private employer. A 45-year-old employee in Kolkata told Reuters: “This is devastating news. For someone my age, it’s too hard to find a new job.”

More absurdly, more than 500 applicants who received TCS offers, with their onboarding dates set for July 2025, are still waiting indefinitely to start work—many of them have already left their previous jobs.

Beyond layoffs, the hiring engine has started to stall.

India’s top five IT companies saw a net reduction of about 7,000 employees in the fiscal year ending March 2026, compared with a net increase of more than 12,000 in the previous year. Over the past five years, these five companies averaged total annual hiring of about 230,000 people; for FY26, that number is down to 170,000. TCS’s campus recruitment plan has been cut from an average of 40,000 per year over the past three years to 25,000.

Gaurav Vasu, founder of market intelligence firm UnearthInsight, estimates that 400,000 to 500,000 IT professionals face the risk of layoffs over the next two to three years, and 70% of them are the core layer with 4 to 12 years of experience.

Fund manager Saurabh Mukherjea has done an even bigger calculation: India produces about 3 million engineering graduates every year, and about 1.5 million of them are considered “qualified engineers.” Before 2020, nearly all of these 1.5 million were absorbed by the IT services industry. Over the past three years, that figure has fallen to nearly zero. At the same time, Azim Premji University’s “2026 India Employment Report” shows that the unemployment rate for graduates aged 15 to 25 is as high as 40%.

The shockwave is now traveling in reverse along the path where wealth used to spread outward.

In the first quarter of 2026, residential sales in major Indian cities fell 13% year-on-year. Analysts directly pointed to IT layoffs as one of the main causes. Co-rented apartments in Bengaluru suddenly can’t find tenants, and landlords are tallying the bill against the IT companies. Mukherjea also observed a dangerous signal: large numbers of people who sense they will be laid off are rushing to apply for personal loans and mortgages before unemployment hits them. Over the past 12 months, some of India’s loan growth has come from these “doomsday loans.”

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

Sorry—this route is also being welded shut by Washington step by step.

In September 2025, the Trump administration temporarily raised the H-1B visa fees from 5000 dollars to 100,000 dollars—a 20-fold increase. Two months earlier, Trump publicly asked Google and Microsoft to “stop hiring in India.”

In 2024, Indians took more than 200,000 US work visas; Indian companies accounted for 20% of all approved H-1B petitions. This channel was once the physical extension of India’s IT model in the real world.

About 60% of India’s IT industry revenue comes from the US market, nearly 135 billion US dollars. Now, India is facing a dual squeeze structure. AI gives US companies for the first time a technological option for “service reshoring,” meaning they no longer need to send work to Bengaluru; the new visa policies also ensure that Indian engineers will find it very difficult to send themselves to the US.

People can’t go out, and work can’t come in.

What’s even more frightening is that the great liquidation brought by AI is still continuing.

India’s median age is only 28. Over the next 20 years, tens of millions of young people will pour into the labor market every year.

The demographic dividend is a check with an expiration date. If it gets cashed, India becomes the next great power; if it can’t be cashed, the same batch of young people will move from the left side of the balance sheet to the right.

A speck of dust from an era, falling on an individual, becomes a mountain. Shiv is still sending out his 5 resumes every day. Bengaluru’s office buildings are still brightly lit, but for the first time, the people inside have begun to seriously consider how much longer those lights will stay on—and for whom they will keep shining.