FII Allocation to IT Falls to 5.6%, While Financial Sector Exposure Declines to 29.5%

Foreign Institutional Investors (FIIs) reduced their exposure to India's information technology and financial sectors as sustained outflows and a broader market correction weighed on portfolio allocations during 2026. 

FII allocation to the IT sector declined to 5.6% of total equity holdings in May, the lowest level in NSDL data available since 2012. Meanwhile, FII exposure to financial stocks fell to 29.5%, marking a 16-month low. 

IT Sector Witnesses Sharp Decline in FII Holdings 

FII allocation to IT has fallen 185 basis points since the beginning of 2026 and nearly 500 basis points compared with the start of 2025. 

In value terms, FIIs held approximately $40 billion worth of IT stocks in May, compared with around $60 billion at the beginning of 2026 and $81 billion at the start of 2025. 

According to NSDL data, the IT sector accounted for nearly $3 billion of FII equity outflows so far in 2026. 

Financial Sector Allocation Falls to 16-Month Low 

FII allocation to financial stocks declined 285 basis points from the beginning of 2026 to 29.5% in May. 

The value of FII holdings in financial stocks stood at around $210 billion, down from nearly $250 billion at the start of the year. 

The financial sector accounted for approximately $12.2 billion of FII equity outflows in 2026, representing a significant share of overall foreign selling. 

Read More: Government Exempts FIIs from Interest and Capital Gains Tax on G-Sec Investments 

Overall FII Equity Assets Decline 

At the end of May, total FII equity assets stood at approximately $710 billion, down 14% compared with $826 billion at the end of December 2025 and $831.49 billion at the end of December 2024, reflecting the impact of sustained outflows and market correction. 

Conclusion 

Foreign institutional investors have reduced their allocations to both the IT and financial sectors during 2026, taking IT exposure to its lowest level since 2012 and financial sector allocation to a 16-month low. The decline reflects sector-specific challenges alongside broader portfolio repositioning overseas investors. 

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