FIIs Hit Sell Button on TCS, Infosys and Other IT Stocks: Peak Pessimism or More to Come?

India’s IT sector is witnessing a noticeable wave of selling pressure. Foreign Institutional Investors (FIIs) are pulling out of top IT names like TCS, Infosys, HCL Tech, Persistent, and Mphasis, leading to growing concerns in the market. The broader Nifty IT index has already corrected by 26% from its peak, affecting both large-cap and mid-cap IT stocks.

The decline in FII holdings is striking. For example, Infosys saw its FII stake fall from 33.3% to 32.89%, while TCS witnessed a sharper drop from 12.68% to 12.04%. HCL Tech wasn’t spared either, with FII ownership dipping slightly. Other names like LTIMindtree, Mphasis, and Persistent saw similar trends, indicating a broad-based and possibly sentiment-driven retreat.

Surprisingly, Wipro stood out in this trend, as it was the only major IT stock where FII stake increased—from 7.81% to 8.35%. Yet, Wipro’s stock still remains 28% below its peak, highlighting the challenges the entire sector is facing.

On the other hand, domestic mutual funds are showing confidence. They’ve increased stakes in key IT companies like TCS, Infosys, Tech Mahindra, and Persistent, though there were small exits from LTIMindtree and Wipro. This contrast between foreign and domestic investor behavior reflects a nuanced view of the Indian IT landscape.

The selling spree hasn’t stopped yet. In the first half of April, FIIs further reduced their exposure, pulling out nearly ₹13,828 crore from Indian IT stocks.

Why are FIIs selling Indian IT stocks?

Experts suggest that FIIs are rotating their portfolios towards more promising sectors like capital goods, pharma, and financials. With India’s growth story shifting gears in these areas, the defensive tag that once belonged to IT is slowly fading.

The weakening US dollar is another big factor. Indian IT companies earn a significant chunk of their revenue from North America, especially from BFSI clients. A softer dollar impacts rupee earnings and puts pressure on margins. Alongside this, global BFSI stress, delayed client budgets, and slow deal closures are making the sector less attractive.

Q4 earnings have added to investor concerns. TCS, Infosys, and Wipro all reported weaker-than-expected results. TCS posted a marginal drop in profits, while Infosys’ net profit slipped over 11%. Both companies offered cautious outlooks for FY26, citing reduced discretionary spending and delays in project ramp-ups.

Infosys, in particular, delivered its weakest revenue growth guidance in a decade (excluding pandemic years), at just 0–3%. Wipro too flagged a possible revenue dip of up to 3.5% in Q1FY26, although it remains committed to profitability and long-term stability.

What do the valuations suggest?

Top-tier IT stocks are trading at cash flow yields of 5–6%, with forward P/E ratios ranging from 17x for Wipro to 22x for TCS. On the surface, these may seem like attractive valuations—but they’re based on muted growth expectations.

Analysts have already cut FY26 earnings expectations by 6–8%, signaling cautious optimism. Unless growth visibility improves, FIIs may continue to stay cautious.

Some market experts believe that IT stocks may be nearing a bottom. Valuations are now closer to 5-year averages, and consolidation could be around the corner. However, without clear signs of growth recovery, a strong rally looks unlikely in the short term.

Until the Indian IT sector delivers on growth, margins, and deal momentum, investors—especially foreign ones—may prefer to wait on the sidelines.