TheInterviewTimes.com | March 06, 2026 | 11:14 PM IST | New Delhi
Foreign investors sold $1.85 billion in Indian IT stocks in February 2026 due to AI fears. Nifty IT index drops 19.5 percent. Explore FPI outflows, stock impacts, and cautious outlook for Indian IT sector.
Foreign portfolio investors withdrew nearly 169 billion rupees, equivalent to $1.85 billion, from Indian IT stocks in February 2026. This marked the highest monthly outflow in seven months and stemmed from growing concerns over artificial intelligence disruption to the outsourcing model. The selloff triggered a 19.5 percent plunge in the Nifty IT index, its worst monthly drop since the 2008 financial crisis.
Scale of the Selloff
The Nifty IT index shed over 6.4 lakh crore rupees in market value during February, with all ten constituents posting double-digit losses. Infosys declined 20.4 percent, Tata Consultancy Services fell 18 percent, and HCL Technologies dropped 20.1 percent. Tech Mahindra and Wipro saw the sharpest falls at 23.5 percent and 17.4 percent respectively.
Foreign holdings in IT stocks fell to 4.18 lakh crore rupees by month-end, the lowest in four years and down 21.8 percent from January. Cumulative FPI sales from Indian IT reached 74,698 crore rupees since January 2026.
AI Disruption Triggers the Exodus
Investors fear generative AI will automate routine coding and testing tasks central to Indian IT firms’ revenue. U.S. companies like Palantir highlighted AI tools that shorten project timelines and cut outsourcing needs. Brokerage Jefferies issued downgrades, slashing target prices by up to 33 percent and warning of 30 to 65 percent valuation drops in a worst-case scenario.
JPMorgan noted the sector’s third year of subpar growth from 2023 to 2025, projecting further 10 percent valuation pressure if slowdowns persist.
Sector Rotation Amid Broader Inflows
Despite the IT rout, FPIs remained net buyers of Indian equities overall, injecting 226.15 billion rupees in February, the highest in 17 months. Funds flowed into capital goods, financial services, metals, and energy on strong earnings and an India-EU trade deal.
Into early March 2026, selling continued with FPIs net selling 175.70 billion rupees in the first four sessions amid geopolitical tensions and rising oil prices. On March 4, FIIs sold about 87 billion rupees net while domestic investors bought.
Cautious Outlook and Growth Projections
Analysts urge Indian IT firms to form AI partnerships for recovery. Nasscom forecasts sector revenue at $315 billion for FY26, up 6.1 percent, with AI services contributing $10-12 billion.
Recent deals include Infosys-Anthropic alliance and Tata-OpenAI infrastructure projects. Yet near-term caution prevails as AI transition may slow growth, with Nifty IT hovering around 30,000 in early March after February lows.
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