FPIs extend IT sell-off, dumping Rs 4,873 crore in the first half of November

Mumbai: Information technology continued to bear the brunt of foreign sales as foreign investors sold shares worth ₹4,873 crore in the first half of November after selling ₹2,194 crore in October. The sector has witnessed foreign selling for the fourth month in a row, with foreign investors dumping shares worth over ₹70,000 crore between January and October. “Historically, when the IT sector has underperformed, valuations in the sector have fallen; however, this time around, valuations remain relatively high despite weak earnings,” said Siddarth Bhamre, head of research at Asit C Mehta Intermediates. “This is pushing foreign funds to leave the sector.”

While valuations in the IT sector could be a factor in the overseas sell-off, global outperformance of AI companies could also have clouded the sector’s outlook, analysts said.

“Globally, the AI-based companies are vastly outperforming, while the large Indian listed IT companies have little or no exposure to AI and are largely in the business of services, which are likely to be replaced by AI,” said UR Bhat, co-founder and managing director of Alphaniti. “This could be why they are reducing their holdings in the sector.”

Foreign investors sold shares worth ₹21,021 crore across 16 sectors in the first half of the month, according to NSDL data. In the first 15 days of the month, consumer services and healthcare saw sales of ₹2,918 crore and ₹2,526 crore respectively. Global investors sold shares worth over ₹3,000 crore in the two sectors in October.

“Foreign investors are anticipating the outcome of the US-India trade deal soon, but are disappointed with the delays,” Bhat said. “This is driving them to lighten their positions in different sectors.” In the first half of November, global investors bought shares worth ₹9,413 crore in the telecom sector, largely attributable to the Bharti Airtel deal in the first week of November worth ₹10,300 crore. The sector received foreign inflows worth ₹33,662 crore between January and October. Oil and gas and ‘Others’ category witnessed foreign purchases worth ₹2,992 crore and ₹1,446 crore respectively in the first half of the month. Analysts said October’s foreign inflows could be a blip in the larger sales trend.

“FPIs remain cautious on India as the markets remain expensive and they have opportunities to invest in other cheaper markets in Asia,” Bhamre said. “There is also a shift in the asset class as debt and gold are more attractive when interest rates are expected to fall globally.”