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According to the shareholding pattern of top Indian IT companies, FIIs have trimmed their stake over the last one year amid growing fear that AI is causing significant disruption
 "FIIs cut stake in IT firms in Q3FY26 amid AI woes; here's what data shows")
The Indian IT sector has come under pressure of late and the recent data clearly shows the shift in investor sentiment. Foreign institutional investors (FIIs), who have traditionally held significant stakes in leading IT companies, have reduced their exposure over the last one year.
According to the shareholding pattern of top Indian IT companies accessed by Business Standard, FIIs have trimmed their stake, indicating that they are turning cautious as growth moderates with AI forcing traditional software firms to revisit their strategy.
The intensity of selling in the IT sector can be gauged by the fact that FPIs have been selling IT stocks since the July 2025 and alone in the first half of February, they pulled out ₹10,956 crore from the IT companies, making it the worst selloff, according to NSDL data. During the same period, Dalal Street saw a total inflow of ₹29,709 crore.
As per the data, Tata Consultancy Services (TCS), which is the country's largest IT services exporter, saw FPI holding fall to 10.37 per cent in Q3FY26 from 12.7 per cent in Q3FY25. However, foreign investors marginally increased their stake in the Tata group company on Q-o-Q basis from 10.33 per cent. Similar is the case with Infosys which witnessed a decline to 30.68 per cent in Q3FY26 from more than 33 per cent in Q3FY25. On sequential basis (Q2FY26), FIIs raised their stake in the Bengaluru headquartered IT company, when they owned 30.07 per cent stake.
Noida headquartered HCL Technologies reported FII ownership at 16.2 per cent in the third quarter of FY2026, down from 19.4 per cent in the same quarter last year (Q3FY25) and 16.64 per cent in Q2FY26.
Tech Mahindra saw a sharper drop in FIIs holding. Foreign investors reduced their stake to 17.94 per cent in the quarter compared to 24.2 per cent in Q3FY25 and 20.60 per cent in Q2FY26.
| Cos | Q3FY26 | Q3FY25 | Q2FY26 |
| TCS | 10.37% | 12.70% | 10.33% |
| Infosys | 30.68% | 33% | 30.07% |
| HCL Tech | 16.20% | 19.40% | 16.64% |
| Tech Mahindra | 17.94% | 24.20% | 20.60% |
So far in February, TCS shares have declined 15 per cent, Infosys share price has fallen 17 per cent and HCL Technologies stock has dropped 14 per cent. Tech Mahindra has plunged 15 per cent. In February so far, the Nifty IT index, which has 10.8 per cent weightage in the benchmark Nifty 50 index, has tumbled more than 15 per cent.
The consistent reduction in FIIs holding across IT companies suggests a broader sectoral shift rather than company-specific issues.
Analysts believe that rising concerns over AI-led disruption, slower decision-making by clients, pressure on technology spending and macroeconomic uncertainties could be influencing sentiment.
Vinod Nair, head of research, Geojit Investments, said that a broad-based global tech sell-off, coupled with fears of a potential AI bubble, have dented sentiments. Discretionary tech spending slowed as clients deferred projects and deal cycles lengthened, while rapid advances in AI intensified concerns about structural pressure on traditional outsourcing models.
"Margin headwinds, muted management guidance, tighter U.S. visa norms, and subdued global demand, along with valuations that appear stretched relative to earnings growth, prompted FIIs to book profits," he said, adding that FII outflows may persist in the near term given uncertainty around AI’s impact on deal flow, pricing, and margins, with FY27–28 growth expected to stay modest.
The trend of FIIs trimming their stake is also visible among mid-sized IT companies. According to the data, LTIMindtree (LTIM) recorded a decline in FII holding to 6.5 per cent in December quarter of FY2026 from 7.4 per cent in the same quarter of the previous fiscal. Coforge saw a significant fall to 34.5 per cent from 42.5 per cent in the year ago period. Persistent Systems reported FII ownership at 22.8 per cent in Q3FY26 versus 24.7 per cent a year ago. Mphasis too saw a slight reduction, with FII stake at 19.8 per cent in Q3FY26 as against 20.8 per cent in Q3FY25.
| Cos | Q3FY26 | Q3FY25 |
| LTIM | 6.50% | 7.40% |
| Coforge | 34.50% | 42.50% |
| Persistent Systems | 22.80% | 24.70% |
| Mphasis | 19.80% | 20.80% |
Sunny Agarwal, head - fundamental research, retail desk at SBI Securities, said that there is a clear change in FPI flows. The decline in FII participation reflects cautious global investor behaviour and that the coming quarters will be important to see whether this trend continues or stabilises.
"This is likely due to growth uncertainty for IT services companies, as AI adoption can lead to deflation in the business. The pivot towards AI related revenue will take a few quarters. Going forward, there will be differentiation between various IT cos offerings and that is the function of tie-up with AI solution providers and ability to help clients in cost take out deals and at the same time improve in house productivity," he said.
First Published: Feb 23 2026 | 8:32 AM IST
