Market Alert: Foreign Capital Flees Indian IT Foreign Institutional Investors (FIIs) are accelerating their exit from India’s Information Technology sector. In the first two weeks of February 2026, overseas funds pulled out **Rs 10,956 crore** from IT stocks. This intensified selling brings the total FII outflow for the sector to **Rs 74,698 crore** since the start of 2025. The persistent liquidations reflect a deepening crisis of confidence in the traditional software services business model. The AI Disruption Factor The primary catalyst for this exodus is the rapid advancement of autonomous AI tools. Investors are reacting to the launch of "Claude Cowork" by Anthropic and new highly autonomous platforms from Palantir Technologies. These tools are no longer viewed as mere assistants but as potential replacers for manual labor. Reports indicate that tasks once taking years, such as complex SAP migrations, are now being compressed into weeks. Revenue Deflation Risks The Indian IT industry has long relied on a headcount-based billing model. As AI drives massive productivity gains, analysts fear "revenue deflation." If a project that previously required **100 billable hours** can now be completed in **5 hours** using AI, the revenue for major firms like TCS and Infosys could shrink significantly. Estimates suggest that **30% to 40%** of IT services revenue is now vulnerable to this shift. Index and Stock Performance The Nifty IT index has cratered by approximately **13%** so far this year. Individual stock performance highlights the severity of the sell-off: * **Wipro:** Down **19%** * **LTIMindtree:** Down **22%** * **TCS:** Down **16.9%** since January 1st Market heavyweights are struggling to hold valuations. In a symbolic shift earlier this month, the State Bank of India (SBI) overtook TCS in market capitalization, signaling a rotation from export-oriented tech into stable, domestic-focused sectors. Current Market Volatility As of February 19, 2026, the sector remains highly volatile. While some stocks like Infosys saw a brief **2.5%** recovery during "AI Strategy" presentations, broader sentiment remains bearish. Foreign investors are currently in a "wait-and-watch" mode, closely monitoring whether Indian firms can successfully pivot to high-value AI consulting or if they will face a permanent erosion of their legacy outsourcing revenue.