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Foreign Investors Shed $3.2 Billion over 21 Days in July, Tech Sector Experiences $2.3 Billion Withdrawal

IT stocks made up a significant portion of the overall $2.9-billion net selloff in July, accounting for approximately 80% or $2.3 billion.

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Foreign Institutional Investors (FPI) offloaded $3.2 billion in assets during the 21-day period of...
Foreign Institutional Investors (FPI) offloaded $3.2 billion in assets during the 21-day period of July, with the IT sector experiencing an outflow of approximately $2.3 billion.

Foreign Investors Shed $3.2 Billion over 21 Days in July, Tech Sector Experiences $2.3 Billion Withdrawal

Foreign Investors Sell Off IT Shares in India Amidst Global Uncertainties

Foreign portfolio investors (FPIs) have been net selling IT shares in India, with the trend being driven by escalating global trade tensions, weak corporate earnings, and currency depreciation, according to industry experts.

The escalation of the US-India trade dispute, including recent tariffs imposed by the US on Indian goods, has been a key trigger for this trend. Underwhelming Q1 earnings from Indian companies and a weakening Indian rupee have also contributed to the selloff, making Indian assets less attractive in the short term.

This trend of selling, particularly concentrated in the IT sector, has been significant in 2025 with overall equity outflows by FPIs surpassing ₹1.1 lakh crore year-to-date. The IT sector witnessed the highest outflows during the first half of 2025, followed by sectors like FMCG and power. Although FPIs turned net buyers briefly during April to June 2025, the purchases were not enough to offset the heavy selling in the earlier months, leaving them net sellers overall.

The impact of this FPI net selling on the Indian IT sector includes downward pressure on stock prices and market valuations. The selloff contributes to market volatility and may negatively influence investor confidence in IT stocks in the near term. However, these outflows have occurred despite relatively stable foreign investor shareholding levels in the broader market, reflecting a cautious but not a flight response yet.

If trade tensions ease and earnings improve, analysts expect FPI flows could reverse, potentially stabilizing or boosting IT stocks again.

Key Factors Behind FPI Net Selling

  • US-India trade tensions and tariff hikes.
  • Weak Q1 corporate earnings impacting growth outlook.
  • Depreciation of the Indian rupee against the dollar.
  • General risk aversion amid global uncertainties.

Impact on the IT Sector

  • Pressure on IT stock prices and valuations.
  • Increased market volatility for IT shares.
  • Possible dampening of investor sentiment in the sector.
  • Potential for reversal if external trade issues and earnings improve.

This trend reflects broader macroeconomic and geopolitical factors influencing foreign investment flows rather than sector-specific weaknesses alone.

In other sectors, there was a marginal sequential uptrend in pharma and auto sectors, while IT and Oil & Gas saw a decrease. Bay Capital, an FPI fund that invests in India with a fund size of $750 million, has expressed concerns about the IT sector due to the Trump noise and the impact of artificial intelligence on IT jobs.

FPIs have been net sellers in both July and August, with significant selling activity in both months. In July, FPIs recorded outflows in sectors such as BFSI, realty, and auto, amounting to $671 million, $450 million, and $412 million respectively. On August 6, FPIs sold ₹4,999 crore worth of shares, making it a significant day for net selling activity.

Top sectoral holdings remain unchanged, with BFSI, IT, Oil & Gas, auto, and pharma accounting for 60% of FPI assets in India. Domestic institutions (DIIs) were net buyers of $7.1 billion in July. However, in August, FPIs have been net sellers of more than ₹6,000 crore, with ₹4,999 crore sold on August 6 alone.

The India-US trade deal is still under negotiation, with back door government-to-government interactions among BRIC nations suggesting no immediate resolution. Nikunj Doshi, managing partner at Bay Capital, has also expressed concerns about the potential impact of artificial intelligence on IT jobs in India.

  1. Foreign portfolio investors (FPIs) have been selling off stocks in the IT sector in India, influenced by the escalating US-India trade tensions, weak corporate earnings, and the weakening Indian rupee.
  2. These factors, along with general risk aversion amid global uncertainties, have caused significant outflows, with overall equity outflows by FPIs surpassing ₹1.1 lakh crore year-to-date.
  3. Bay Capital, an FPI fund that invests in India with a fund size of $750 million, has expressed concerns about the IT sector due to the US-India trade tensions and the impact of artificial intelligence on IT jobs.
  4. The selloff in the IT sector has resulted in downward pressure on stock prices and market valuations, increased market volatility, and potential dampening of investor sentiment.
  5. If trade tensions ease and earnings improve, analysts expect FPI flows could reverse, potentially stabilizing or boosting IT stocks again.
  6. In other sectors, there was a marginal sequential uptrend in the pharma and auto sectors, while IT and Oil & Gas saw a decrease, indicating the trend is not sector-specific but influenced by broader macroeconomic and geopolitical factors.

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