Foreign Institutional Investors Dump $6.5 Billion Worth of Indian IT Stocks in 2025 Amidst Layoffs and Revenue Declines

Foreign institutional investors (FIIs) have dumped over Rs 50,000 crore worth of IT stocks in 2025, with Tata Consultancy Services (TCS) being the worst-hit. The selling momentum accelerated last month after disappointing Q1 earnings and widespread layoff announcements. Analysts point to weak revenue performance, margin pressure, and increased reliance on balance sheets to drive growth. The sector's woes have sparked debates on the future of the IT industry.

Foreign institutional investors (FIIs) have sold over Rs 50,000 crore worth of IT stocks in 2025, with Tata Consultancy Services (TCS) being the most significantly impacted. The selling pressure intensified last month following TCS's disappointing Q1 earnings and widespread layoff announcements [1]. Analysts attribute the sell-off to weak revenue performance, margin pressure, and increased reliance on balance sheets to drive growth.

TCS, the country's largest IT services firm, announced job cuts that will impact 2% of its global workforce, or about 12,250 employees [1]. The layoffs, primarily targeting mid- to senior-level managers, are seen as a cost-cutting measure aimed at improving operating margins, which have remained below the firm's aspirational range despite multiple efforts [2]. TCS's operating margin has hovered between 24% and 25% for the past five consecutive quarters, below its stated aspiration of 26% to 28% [2].

The IT sector's woes have sparked debates on its future. Persistently weak and uncertain macroeconomic conditions may have prompted TCS to act. Revenue growth in constant currency terms has steadily declined, from 15.4% in FY22 to just 4.2% in FY25 [2]. The sector's challenges have been exacerbated by increased competition from fintech disruptors and traditional lenders, as well as a shift towards digital innovation and automation.

In contrast, companies like LoanDepot have demonstrated resilience and strategic adaptation in navigating the high-rate mortgage market. LoanDepot narrowed its Q2 2025 net loss by 38% to $25M, driven by 30% loan origination growth and cost cuts [3]. The company's focus on digital innovation, diversified revenue streams, and a 70% refinance recapture rate highlights its ability to retain customers and compete effectively in a volatile landscape.

For investors, the IT sector's challenges present a mix of risk and reward. While the sector faces headwinds, companies that can adapt and innovate may position themselves for long-term value creation. As the IT industry continues to evolve, the ability to navigate margin pressures and leverage technology will be crucial for success.

References:
[1] https://www.deccanherald.com/business/companies/tcs-actual-layoffs-said-to-exceed-12k-3673155
[2] https://www.rediff.com/business/report/the-real-reason-for-the-tcs-layoffs/20250805.htm
[3] https://www.ainvest.com/news/loandepot-q2-2025-earnings-navigating-margin-pressure-strategic-adaptation-2508/