FPIs Turn Buyers in IT Stocks for First Time in 2026, Invest ₹3,358 Crore in July

Foreign portfolio investors (FPIs) turned buyers in India’s information technology sector for the first time in 2026, investing ₹3,358 crore in IT stocks during July as overseas investors began returning to a segment that had faced sustained selling pressure earlier in the year.

The shift marks an important change in foreign investor sentiment toward Indian technology companies. Of the total July investment, ₹3,298 crore came in the second half of the month, indicating that buying accelerated significantly as the month progressed.

The renewed interest in IT stocks came as foreign investors also increased their exposure to several other parts of the Indian market. Consumer durables attracted ₹4,958 crore from FPIs during July 16-31, while healthcare received ₹3,654 crore during the same period. Consumer services, automobiles and auto components, construction materials and chemicals also recorded foreign buying during the fortnight.

The broader turnaround in foreign flows is notable because FPIs had remained heavy sellers of Indian equities for much of 2026. July was only the second month of net equity inflows since February, with FPIs investing ₹20,200 crore in Indian equities during the month after four consecutive months of selling.

The buying suggests that overseas investors may be becoming more comfortable with valuations after the correction seen across several Indian sectors. IT stocks had been among the areas facing concerns over slower technology spending, currency movements and the impact of artificial intelligence on traditional outsourcing models.

The sector’s July recovery was supported by better-than-feared June-quarter results from several major IT companies. Stronger earnings and management commentary may have helped reduce some of the concerns surrounding the industry’s near-term growth outlook.

The return of foreign buying is particularly important for large Indian IT companies because FPIs have historically held significant stakes in the sector. When overseas investors reduce their exposure, the selling can put considerable pressure on share prices. Conversely, even a moderate return of foreign capital can support valuations when domestic investors are already active.

The renewed interest also comes as the Indian IT sector adjusts to the rapid expansion of generative AI and AI-led automation. Investors had been concerned that AI could disrupt traditional application-development and outsourcing businesses, but companies are increasingly positioning AI as a source of new demand rather than simply a threat.

Indian IT services companies are now pitching AI transformation, cloud migration, data modernisation and automation projects to global customers. If enterprises increase spending on these areas, India’s technology companies could benefit from a new cycle of technology investment.

The July FPI flows therefore do not necessarily mean that concerns around the sector have disappeared. Instead, they suggest that foreign investors may be becoming more selective about valuations and individual company prospects.

The broader flow data shows that FPIs were not simply returning to technology stocks. Their buying was spread across sectors linked to domestic consumption and healthcare as well, suggesting that the latest investment pattern may be broader than a single IT-sector recovery.

ICICI Direct’s head of fundamental research Pankaj Pandey said money appeared to be gradually moving into broader parts of the market beyond index-heavy stocks. The observation comes as the Nifty hovered around 24,000 while mid-cap and small-cap indices also continued to perform strongly.

The shift toward IT is significant because the sector had previously been under pressure from concerns over global economic uncertainty and slower discretionary technology spending. Many overseas customers have been cautious about large technology projects, particularly when economic conditions remain uncertain.

However, the emergence of AI has changed the nature of technology spending. Companies that delay traditional IT projects may still be willing to spend on AI infrastructure, automation and productivity initiatives if they believe those investments can reduce costs or improve competitiveness.

This could create an opportunity for Indian IT companies to participate in a new wave of enterprise technology spending.

The sector is also benefiting from the relatively attractive valuations created by the earlier correction. When stocks decline without a corresponding deterioration in long-term earnings potential, institutional investors can view the weakness as an opportunity to build positions at lower valuations.

That appears to be one factor behind the July buying, although the sustainability of the trend will depend on future earnings and global technology spending.

The return of foreign capital also matters for India’s currency and broader financial markets. Sustained portfolio inflows can increase demand for the rupee and provide additional liquidity to domestic equity markets.

At the same time, the latest buying should not be interpreted as a complete reversal of the foreign-investor trend for 2026. Despite the July recovery, FPIs remained substantial net sellers of Indian equities for the year. They had withdrawn more than ₹2.5 lakh crore from Indian equities by the end of July, according to available depository data.

The scale of the earlier outflows means that July’s ₹20,200 crore inflow represents a meaningful improvement but not yet a complete return of foreign investor confidence.

August has nevertheless started with another strong indication of improving sentiment. FPIs invested ₹12,921 crore in Indian equities during the first week of August, according to depository data, extending the positive momentum from July.

Several factors are supporting this broader improvement in sentiment, including expectations of US interest-rate cuts, softer crude prices, a relatively stable rupee and improving domestic macroeconomic conditions.

For IT companies, the next major test will be whether foreign buying continues beyond a short-term valuation trade. Sustainable FPI interest would likely require evidence that revenue growth is stabilising, margins remain healthy and AI-related demand is translating into meaningful new business.

Investors will also watch large technology companies’ deal wins, client spending patterns and guidance for the remainder of the financial year.

The competitive environment remains challenging. Indian IT companies face competition from global consulting firms, technology vendors and increasingly from AI-native service providers. Automation could also reduce the amount of human labour required for certain traditional outsourcing projects.

At the same time, companies with strong capabilities in AI, cloud, cybersecurity and digital transformation could gain from the shift in enterprise technology budgets.

The July inflows therefore provide an early indication that foreign investors may be reassessing the risk-reward equation in Indian IT stocks.

If earnings growth improves and global technology spending accelerates, the sector could attract additional foreign capital. If growth remains weak or AI disrupts traditional revenue streams faster than companies can create new business, the recent buying could prove temporary.

The broader industry impact is that FPIs are beginning to show renewed confidence in India’s IT sector after months of selling. The ₹3,358 crore July investment is the first net buying by foreign investors in Indian IT stocks in 2026, while the concentration of buying in the second half of the month suggests that sentiment improved as the quarter’s earnings and broader market conditions became clearer.

For India’s technology industry, sustained foreign buying would provide an important source of market support at a time when companies are undergoing a major transition toward AI-led services. The immediate signal is encouraging, but the longer-term direction will depend on whether Indian IT firms can convert AI disruption into a new growth cycle and deliver stronger earnings.

For investors, the July flow reversal is therefore best viewed as an early sign of changing sentiment rather than proof that the IT sector has entered a sustained bull cycle.