The Indian IT sector is currently navigating a period of intense volatility following a strategic shift in the global AI landscape. A recent technical update from the AI firm Anthropic has acted as a catalyst for a broad sell-off, raising fundamental questions about the future of traditional software services and legacy system maintenance. The market reaction was swift and severe. The Nifty IT index plunged by 4.7% in a single session, marking one of its sharpest declines in recent months. This downward pressure saw industry heavyweights like Infosys and HCL Technologies slide between 3% and 5%, while the broader sector witnessed a combined market capitalization erosion of approximately 1.2 trillion rupees. At the center of this turbulence is a blog post from Anthropic detailing the capabilities of its "Claude Code" tool. The tool is designed to automate the modernization of COBOL, a decades-old programming language that still powers roughly 95% of global ATM transactions and critical banking infrastructure. Traditionally, maintaining and updating these legacy systems required massive teams of consultants and years of manual labor—a core revenue stream for many Indian IT firms. Anthropic’s claim that AI can now compress modernization timelines from years to just a few quarters has rattled investor confidence. The fear is that the "managed services" model, which relies on high headcount and billable hours, is facing structural deflation. If AI can autonomously handle code analysis and documentation, the high-margin maintenance contracts that have sustained the sector for decades may rapidly shrink. Global precedents have intensified these concerns. IBM recently experienced its steepest daily decline in 25 years, losing over 30 billion dollars in market value following the Anthropic announcement. As IBM’s mainframe business is deeply intertwined with COBOL systems, the market viewed the AI breakthrough as a direct threat to its consulting and infrastructure moats. Sector analysts have noted that the IT industry’s share of India’s corporate profit pool has already slipped to a three-year low of 9%. With the Nifty IT index down nearly 20% over the past year, the sector is currently the weakest link in the broader market. While many firms are attempting to pivot toward AI-led transformation projects, the transition is proving to be complex and capital-intensive. Looking ahead, the industry faces a structural reset. The focus is shifting from labor-based arbitrage to high-value consulting and AI implementation. However, until companies can demonstrate that they can monetize AI at a scale that offsets the loss of traditional maintenance revenue, the sector is likely to remain under significant pressure. Professional outlooks remain cautious, with some brokerages cutting price targets for major players by as much as 33% as the market adjusts to this new economic reality.