Foreign Portfolio Investors (FPIs) dumped Indian information technology (IT) stocks worth nearly ₹11,000 crore in the first half of February, amid mounting concerns over artificial intelligence (AI)-led disruption in the sector.
FPIs were net sellers of Indian IT shares to the tune of ₹10,956 crore between February 1 and 15, according to data from the National Securities Depository Limited (NSDL). This follows FPI outflows of ₹1,835 crore from the IT sector in January 2026.
As a result, total FPI investment in IT stocks declined nearly 16% to ₹4,48,938 crore as of February 15, 2026, down from ₹5,33,953 crore at the end of January.
IT stocks have been under sustained selling pressure since last year, weighing on overall sectoral performance. The Nifty IT index has fallen 12% over the past three months and declined more than 16% in the last one month.
The sharp sell-off comes amid growing concerns that AI could disrupt traditional software and SaaS business models, potentially reducing the scope for IT services work and impacting revenue growth. Market sentiment has been influenced by fears that rapid advancements in agentic AI could structurally weaken the conventional IT services model, which has historically relied on staff augmentation.
According to brokerage firm UBS, current valuations suggest that investors are pricing in terminal free cash flow (FCF) growth of 4–6%, compared with 6–7% a month ago. FCF yields have risen to around 6%, nearing levels seen during previous downturns such as the cloud slowdown and the COVID-19 period, reflecting heightened investor scepticism. UBS believes that a structural evolution in the business model is both necessary and likely.
Meanwhile, JPMorgan noted that the IT sector is likely in its third consecutive year of below-par growth during CY23–25, driven by a combination of structural and cyclical factors. The brokerage acknowledged that quantifying the net impact of AI — both deflationary and inflationary — remains challenging at this stage of the cycle.
Its reverse discounted cash flow (DCF) analysis indicates that current stock prices imply around 4% terminal growth with no near-term acceleration. If the subdued growth witnessed during CY23–25 were to persist indefinitely, the potential downside to current valuations would be limited to about 10%. A downside exceeding 30% would materialise only in a scenario of zero terminal growth.
The firm also highlighted that free cash flow and dividend yields are at levels previously observed during major market dislocations, including the global financial crisis and the COVID period.
Sectoral FPI Trends
Apart from IT, FPIs offloaded Fast Moving Consumer Goods (FMCG) stocks worth ₹1,182 crore during February 1–15. Healthcare saw FPI outflows worth ₹1,051 crore, while Consumer Durables witnessed outflows of ₹434 crore.
In contrast, the Capital Goods sector attracted strong FPI inflows of ₹8,032 crore during the same period. Financial Services saw inflows of ₹6,175 crore, while Oil, Gas & Consumable Fuels garnered ₹4,678 crore in net buying, as per NSDL data. Metals & Mining and Power also witnessed FPI inflows of over ₹3,000 crore each.
Overall, net FPI inflows into the Indian stock market stood at ₹19,675 crore during February 1–15, reversing the outflow of ₹35,962 crore recorded in January 2026.
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