How Did FII Ownership in India’s IT Sector Fell From 10.3% to 7.4%?

India’s information technology (IT) sector is currently facing tough times. Foreign institutional investors (FIIs) have sold $4.1 billion worth of IT shares recently. This has caused FII ownership in Indian IT stocks to drop sharply from 10.3% to 7.4%. This large sell-off reflects declining confidence from foreign investors in the sector’s future.

Ownership of Domestic Investors Drops Below 8%

Not only foreign investors, but domestic investors are also pulling back from IT stocks. Their holdings have fallen to a record low, dropping below 8%. This shows that both domestic and foreign investors are worried about the sector’s prospects.

Why Is the IT Sector Struggling?

Several factors are causing these problems:

• Slowing earnings growth: IT companies are not growing as fast as before.
• Low investments in AI: Despite AI’s importance, many companies are not investing enough.
• Global economic challenges: Slowdowns in major economies are affecting demand.

Impact of Artificial Intelligence

Artificial intelligence (AI) is changing the IT industry rapidly. According to Kotak, a leading financial firm, AI could cause a 2-3% annual drop in revenue for IT companies over the next 3 years. This is because AI may replace some traditional IT services, leading to lower earnings. Citi, another major financial institution, predicts the IT sector will see its third straight year of slow growth.

Read more: PNB and Bank of India Reduce Lending Rates Effective September 2025.

Conclusion

India’s IT sector is going through a challenging phase with foreign and domestic investors pulling back and slowing growth. The rise of AI is reshaping the industry, causing near-term revenue pressure. However, expert opinions suggest that the sector may recover once global economic conditions improve. Strategic moves like mergers and acquisitions and currency shifts could offer opportunities for investors willing to stay patient.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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