FIIs dump Rs 10,956 cr in IT stocks in early February; holdings at 4-year low

IT stocks

• FIIs sold over Rs 10,956 crore in IT stocks in early February
• IT stocks hit by AI concerns, Nifty IT index down 14 percent
• FIIs bought capital goods, metals, and financial services stocks

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Foreign institutional investors (FIIs) sold over Rs 10,956 crore in information technology stocks during the first half of February, as the sector witnessed a sharp selloff amid concerns that rapid advances in generative artificial intelligence could reduce demand for large-scale, human-led coding and IT support services, a key revenue driver for India’s software exporters.

With this selloff, FIIs’ combined investment in IT stocks declined to Rs 4.49 lakh crore as of February 15, the lowest level in four years, down 16 percent from Rs 5.34 lakh crore at the end of January 2026, according to NSDL data.

FIIs have been selling IT stocks continuously since the start of 2025, with total selling of nearly Rs 74,698 crore during the period. Details of stock-wise stake reductions are expected to be released in the March quarter shareholding patterns.

FII holdings in IT stocks stood at a record of around Rs 7.3 lakh crore at the start of 2025. With the recent decline in stock prices along with continued selling, the value of their holdings has fallen 38 percent.

So far in February, Infosys has declined 16.5 percent, TCS has fallen 14 percent and HCL Technologies has dropped 14.2 percent. Tech Mahindra is down 12 percent, while Persistent Systems and Wipro have fallen around 10 percent each. During February to date, the Nifty IT index has declined 14 percent.

Meanwhile, mutual funds’ combined investment in the top 10 IT stocks fell to Rs 3.04 lakh crore as of February 13, compared with Rs 3.56 lakh crore at the end of January 2026, indicating a notional loss of over Rs 50,000 crore.

According to a JP Morgan report titled “Looking Through the AI Fog,” the sector is likely in the third year of below-par growth during CY23-25, reflecting a combination of structural and cyclical factors. The report said it is difficult to quantify the precise impact of emerging technologies and the duration of the current demand phase. It added that enterprise software development and integration would continue to require significant IT services support.

The report further stated that its reverse discounted cash flow analysis suggests stocks are factoring in 4 percent terminal growth at current prices with no short-term acceleration. If the below-par growth seen during CY23-25 were to become permanent terminal growth, the downside to current prices would be at most 10 percent. A scenario of more than 30 percent downside would arise only if companies see zero terminal growth with no growth thereafter. It added that free cash flow and dividend yields are at levels previously seen during major market dislocations such as the global financial crisis and the COVID period.

Capital Goods, Metals Attract FII Inflows

While FIIs continued to sell IT stocks, they remained buyers in several other sectors. Capital goods stocks saw buying worth Rs 8,032 crore during the first half of February after buying Rs 2,761 crore in January. Financial services and oil and gas stocks recorded buying of Rs 6,175 crore and Rs 4,678 crore, respectively, during the first half of February, after selling over Rs 8,592 crore in financial services and Rs 940 crore in oil and gas in January.

Other sectors such as metals and mining, power and construction also saw buying by FIIs. Metals and mining recorded buying worth Rs 3,279 crore during the first half after buying over Rs 11,526 crore in January. Power and construction saw buying worth Rs 3,272 crore and Rs 1,745 crore, respectively, during the first half, after selling over Rs 1,867 crore and Rs 1,532 crore in January.

Apart from IT, FIIs were net sellers in FMCG and healthcare stocks. They sold Rs 1,182 crore in FMCG and Rs 1,051 crore in healthcare during the first half of February. In January, FIIs had sold Rs 7,497 crore in FMCG and Rs 6,162 crore in healthcare sectors.