The bulk of FPI outflows from the IT sector occurred in April 2025, with investors pulling out Rs 15,213 crore—marking the most significant monthly sell-off of the quarter. The selling momentum persisted into May, though at a reduced pace, with net sales of Rs 2,436 crore. Interestingly, sentiment shifted in June as FPIs turned net buyers, infusing Rs 1,166 crore into the sector. However, this late-quarter buying offered only limited relief and was insufficient to counterbalance the heavy outflows seen in the earlier part of the quarter.
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Despite this bearish stance in IT, FPIs maintained a largely positive view on Indian equities overall. Across all sectors, they were net buyers of Rs 38,674 crore in Q1FY26. Supporting this optimism was the aggressive buying by domestic institutional investors (DIIs), who invested a substantial Rs 1.41 lakh crore during the quarter. Their strong participation underpinned the broader market rally, pushing the benchmark Sensex up by over 8% in the same timeframe.
What stood out most in the IT space was the outperformance of several midcap and smallcap stocks. Companies such as Expleo Solutions, Intellect Design Arena, Black Box, and Nucleus Software Exports surged more than 50% in just three months. This trend suggests that investor confidence in select IT names remained intact despite the sector-wide FPI outflows.
At the same time, not all IT stocks were spared. Some names took a hit — KSolves India, Genesys International, and eMudhra declined between 10% and 20% during the quarter. The performance among large-cap players was mixed. Sector heavyweight Tata Consultancy Services (TCS) slipped 5%, likely due to subdued global tech spending and macro uncertainties. In contrast, Infosys posted a 4.5% gain. Other players like KPIT Technologies and L&T Technology Services registered minor corrections, indicating sectoral rotation rather than a broader selloff.According to Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, “The trend of FII buying, which gathered momentum in May, has started weakening in early July. FIIs were buyers for Rs 18,082 and Rs 8,466 crores in May and June, respectively. But early July FII activity indicates selling. In the first four days of July, FIIs were sellers every day with a cumulative sell figure of Rs 5,772 crores.”In the second half of June FIIs were buyers in financials, autos and auto components and oil and gas. They were sellers of capital goods and power. There is a trend of profit booking in segments which have done well recently.
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Resumption of FII buying will hinge on two things: One, if a trade deal happens between India and the US, which will be positive for markets and FII flows; two, Q1FY26 result indications. If the results indicate earnings recovery, that will be positive. Disappointment on these factors can impact the market and, thereby, FII flows.”
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