Finding the Fault Lines

In the years leading up to 2000, a quiet unease began to build around something that sounded trivial: the way computers recorded dates. For decades, to save space, many systems had stored years using just two digits – “99” for 1999. As the new millennium approached, that shortcut suddenly mattered. When the clock turned to “00”, would computers read it as 2000 or 1900? And what would happen to banks, airlines, power systems and other critical infrastructure?

The worry wasn’t just that something might break, but that no one knew exactly where the weak points were. In the end, widespread fixes prevented major disruption, but the episode left behind a quieter realisation: modern systems had grown so complex that even a small, forgotten detail could expose how little of the whole we truly saw.

If Y2K was about not knowing where the weaknesses were, today the concern is how quickly they can be found. That concern came to light this month when American artificial intelligence company Anthropic unveiled its AI model Mythos.

The company says Mythos can quickly scan complex architectures, identify hidden vulnerabilities, and suggest how they might be exploited by cyber attackers. This poses serious risks to economies and public safety. No wonder, then, that it immediately raised alarm bells, especially in sensitive sectors such as finance where decades-old infrastructure sits alongside modern software. And banks and financial regulators across the world are now trying to assess the threats.

The Reserve Bank of India has started discussions with the US Federal Reserve and the Bank of England, as well as local banks. The National Payments Corporation of India—which manages the widely used UPI and other payment systems—is exploring whether limited access to Mythos could help identify “day-zero” risks before they are exploited more widely.

Globally, the US government is planning to make Mythos available to major federal ​agencies. The Hong Kong Monetary Authority is preparing new resilience frameworks focused on AI-driven threats. Regulators in Australia and Singapore have emphasised the need for stronger cyber hygiene while South Korea has asked security officials from major financial firms to review potential exposures. Within the banking system, large institutions like JPMorgan Chase and Goldman Sachs have secured early access to Mythos, allowing them to test its capabilities internally. 

So far, executives have largely struck a measured tone, treating this less as an immediate threat and more as a new variable in day-to-day risk management. That distinction matters because financial systems are not static. They adapt continuously. But the pace at which they can adapt, relative to the pace at which risks can now be discovered, remains an open question – one that markets, regulators and institutions are only beginning to work through.

For now, this is less about a single model and more about what it represents. Financial systems have always carried hidden vulnerabilities; what may be changing is how quickly those vulnerabilities can surface. The emphasis, in India and other countries, is on preparedness – how quickly risks can be identified, contained and recovered from.

Passing the Device

Moving on from Anthropic to Apple, the world’s most valuable smartphone maker said this week Tim Cook will step down as CEO in a decision that surprised markets but also drew praise for the way it handled the leadership transition.

The iPhone maker said Cook will hand over the reins to Apple veteran John Ternus and will become executive chairman. The transition minimizes disruption, just like before when Cook took over from Steve Jobs 15 years ago.

Cook’s tenure was defined by expansion and execution. When he took over as CEO in 2011, the question was whether Apple could sustain its momentum without its founder. What followed was a different kind of growth. The company scaled its ecosystem across hardware, software and services, expanded its installed base to billions of devices, and built one of the most efficient global supply chains – much of it anchored in China. Revenues multiplied, margins remained steady, and product cycles became predictable. The system worked because it was optimised.

That optimisation is now being tested by a different kind of shift.

The centre of value in technology is beginning to move – from devices to capabilities. Advances in artificial intelligence are reshaping how users interact with software, reducing the relative importance of hardware cycles and increasing the importance of integrated intelligence across platforms. Here, Apple’s position has been more measured. While it introduced early consumer-facing AI through Siri, it has yet to define the current cycle in the way some of its peers have. Companies such as Nvidia have gained prominence as AI infrastructure and capability become central to the narrative.

This is the context in which Ternus steps in.

Ternus has spent much of his career on Apple’s core hardware – Mac, iPad, and more recently AirPods. His role in reviving the Mac has been one of the clearer product successes in recent years. The contrast with Cook is not about capability, but orientation. Cook’s strength lay in operations and scale. Ternus comes from product and engineering.

The shift matters because Apple’s next phase may depend less on extending an existing system and more on adapting it. 

Integrating AI meaningfully into devices – particularly the iPhone, which is still Apple’s central product – remains a challenge. The company has begun to respond, including by incorporating AI capabilities from Google into Siri. But the broader question is whether Apple can build a more cohesive strategy within its own ecosystem.

There are early signals of how that adjustment might take shape. Greater emphasis on hardware innovation, new device categories, and a widening competitive field suggest that the next cycle may be less predictable than the last.

For now, markets are adjusting. The initial response has been muted, reflecting both Cook’s continued presence and the familiarity of Ternus within the organisation. But the transition reframes the question. It is no longer only about whether Apple can sustain what it has built. It is about how it adapts to a technological shift that may not reward optimisation in the same way. Whether the next phase of growth will follow the steady expansion that defined Cook’s tenure, or require a more fundamental reworking of what Apple’s products are expected to do, that remains unclear.

IT in Transition

Back home, the fourth-quarter results from India’s IT majors suggest that a degree of stability is returning to the sector, but it is not yet translating into momentum.

Tata Consultancy Services set the tone. The country’s largest software exporter reported a 9.7% rise in quarterly revenue to Rs 70,698 crore and a 12.2% increase in profit to Rs 13,718 crore, both ahead of expectations. Its order book rose to $12 billion, pointing to steady deal activity. More notably, it indicated that enterprise AI adoption is beginning to move from experimentation to scaled deployment, with annualised AI revenue crossing $2.3 billion. Analysts say the AI contribution is still small, and the question remains whether these capabilities can translate into large revenue streams.

Infosys reflected a similar pattern. The company reported a 21% year-on-year increase in quarterly profit and 13.4% growth in revenue alongside large deal wins of $14.9 billion for the year. Margins held steady, and management pointed to “resilient” performance supported by enterprise AI offerings. Yet, the underlying details were more mixed. Constant currency growth was modest, employee headcount declined by over 8,000 in the quarter, and guidance for FY27 revenue growth was set at 1.5-3.5%. Deal activity remains strong, but conversion into near-term growth appears gradual.

Further down the sector, the signals are weaker.

Wipro’s fourth-quarter performance missed expectations on both revenue and profit, and its outlook reinforced the weakness. It guided for flat to a 2% sequential decline in the June quarter, citing muted demand, particularly among US financial clients. Deal wins improved to $3.5 billion, but remain below year-ago levels, and more importantly, are taking longer to convert into revenue. Analysts note that this lag – combined with pricing pressure, salary hikes and integration of lower-margin acquisitions – is weighing on growth and margins, widening the gap between activity and outcomes.

HCL Tech saw an even sharper reaction. Its shares dropped over 10% after the company projected lower-than-expected growth and flagged a “highly fluid” business environment. Broker downgrades and heavy options activity suggested rising caution among investors, while project scale-downs in key markets underscored the uneven demand environment.

Taken together, the results point to a sector in transition. Deal pipelines remain active and AI is beginning to feature more prominently in client conversations. Yet discretionary spending is still constrained, project ramp-ups are slower and near-term visibility remains limited. Growth is present, but it is not broad-based. Large deals are being signed, but their revenue impact is staggered. AI capabilities are expanding, but their contribution to total revenue is still small. Cost optimisation remains a priority for clients, even as new technology cycles begin to take shape.

Markets appear to be adjusting to that reality. The sector has underperformed this year, reflecting concerns that the shift to an AI-led cycle may take longer than initially expected. The traditional labour-led growth model driven by outsourcing contracts is encountering limits. And the next phase – shaped by AI and platform-led services – is still forming. 

For now, the sector is in transition. What matters is not just whether demand improves, but how it evolves – and whether the shift toward AI-led services can move from incremental contribution to a more central driver of growth.

Crude Shock

Moving on to a matter that concerns the entire Indian economy and all its 1.4 billion people, petrol and diesel may soon become costlier as international crude oil prices remain high due to tensions in the Middle East.

Since early March, disruptions in the Strait of Hormuz have tightened crude supply and pushed costs higher. However, India’s state-owned refining and marketing companies, Indian Oil, BPCL and HPCL, have kept fuel prices steady so far.

That may no longer be sustainable. India’s crude import bill has risen sharply even as volumes have declined. Estimates suggest the daily bill has increased by roughly $190-210 million, Kotak Institutional Equities said in a report this week. 

In most systems, such a shift would begin to reflect in retail prices. Here, the adjustment has been deferred. That does not remove the pressure. It shifts where it sits. With pump prices held steady, refiners are absorbing a growing share of the burden. Kotak estimates this monthly burden to be around Rs 27,000 crore. 

While the government has reduced excise duties and reinstated windfall taxes on fuel exports to cushion the impact on people, the gap between domestic fuel prices and underlying costs has widened. Kotak’s estimates suggest that a full alignment would imply an increase in the range of Rs 25-28 per litre. That does not mean such an adjustment will occur in one step – or at all – but it provides a sense of the pressure currently being absorbed within the system.

For households, this is where the transmission becomes visible. The longer prices remain unchanged, the more likely it is that any eventual adjustment – whenever it happens – reflects a larger accumulated gap rather than a gradual shift.

For now, the government has said there is no plan to increase prices. That may, however, change when assembly elections in West Bengal and Tamil Nadu end next week.

The question is not whether prices will eventually adjust, but how that adjustment will be distributed. A full pass-through would make the shift visible at the pump. A partial one would extend the burden across balance sheets. Further policy intervention would redistribute it again. What remains unclear is the path and how long current conditions persist, particularly if disruptions in the Middle East continue.

Market wrap

Other Headlines

• SEBI panel recommends NSE pay Rs 1,800 crore to settle cases ahead of planned IPO
• PlaySimple, the game development unit of Sweden’s Modern Times, files for Rs 3,150-crore IPO
• US sets preliminary antidumping duties of 123% on solar cell and panel imports from India
• India foreign ministry says trade talks with US remain constructive after Washington visit
• France’s ADP to sell around 7.3% stake in GMR Airports for up to $1.05 billion
• Tata Motors unit Jaguar Land Rover to recall 170,000 vehicles in US over loss of drive power
• Zomato drops clause that penalised restaurants for offering cheaper meals to walk-in diners
• HSBC downgrades India stocks to ‘underweight’ from “neutral” as oil shock clouds earnings recovery
• Tech Mahindra Q4 net profit rises 16% to Rs 1,354 crore but misses expectations
• Trent Q4 profit jumps 26% to Rs 400 crore; approves maiden bonus issue
• Nestle India Q4 profit jumps 26% to Rs 1,114 crore on strong demand for packaged foods
• Pernod Ricard begins IPO process for India unit, reports Bloomberg News
• Tesla launches new six-seater Model Y in India to boost tepid sales
• That’s all for this week. Until next week, happy investing!

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