Foreign investors dump IT stocks worth ₹17,000cr amid AI fears
What's the story
Foreign institutional investors (FIIs) have offloaded a whopping ₹17,000 crore worth of Indian IT stocks in February. The massive sell-off was prompted by fears that the rise of generative artificial intelligence (AI) could impact demand for coding and IT support services. These services are crucial revenue drivers for India's software exporters.
Market dynamics
FII holdings at 4-year low
Despite the sector-specific selling, FIIs remained net buyers in Indian equities overall. They bought around ₹15,250 crore worth of stocks during the month. However, their combined investment in IT stocks has plummeted to about ₹4.18 lakh crore at the end of February—the lowest level in four years—according to National Securities Depository Limited (NSDL) data.
Selling trend
Cumulative selling since start of 2025
FIIs have been steadily reducing their exposure to IT stocks since the start of 2025, with a cumulative selling of about ₹74,698 crore during this period. At the beginning of 2025, FII holdings in IT stocks were at a record ₹7.3 lakh crore. However, with the recent decline in stock prices and continued selling, these holdings have fallen by nearly 42.8%.
Market impact
IT stocks' performance in February
The decline in stock prices has been particularly sharp for major IT companies. Infosys fell by 20.4% during the month, while TCS and HCL Technologies dropped 18% and 20.1%, respectively. Tech Mahindra fell by a whopping 23.5%, Persistent Systems lost 23%, and Wipro declined around 17.4%. The Nifty IT index also witnessed a drop of over 20% during the same period.
Sectoral shifts
Other sectors that witnessed FII selling
Along with IT, FIIs also reduced their exposure to some other sectors in the second half of February. They sold shares worth ₹5,238 crore in consumer services and ₹1,775 crore in telecom stocks. FMCG stocks saw selling of around ₹769 crore while chemicals and consumer durables witnessed selling of over ₹350 crore each.
Investment trends
Sectors that attracted FII buying interest
Despite the selling pressure on some sectors, foreign investors showed strong buying interest in others during the latter half of February. Capital goods and auto stocks saw the highest inflows with FIIs buying shares worth ₹4,103 crore and ₹3,075 crore respectively. Construction and metals stocks also witnessed buying of ₹2,742 crore and ₹2,359 crore respectively during this period.