Foreign portfolio investors (FPIs) in July made significant investments in Indian IT stocks, purchasing a net worth of 117.63 billion rupees ($1.40 billion), according to data from the National Securities Depository (NSDL).
This marks the highest investment since the implementation of a new sectoral classification in 2022, which streamlined the total number of sectors from 35 to 22 after the NSE and BSE adopted a common industry classification system.The previous classification divided the IT sector into software, services, and hardware technology.
Analysts attributed the strong buying interest to the US Federal Reserve‘s comments indicating a potential rate cut starting from September, along with generally positive earnings reports. “We expect the start of the interest rate-cut cycle in the US to be a signal for clients to garner confidence on the inflation trajectory, which may drive demand recovery and an uptick in discretionary spending,” said analysts led by Dipesh Mehta of Emkay Global.
Prakash Thakkar and Sujay Chavan of Prabhudas Lilladher added, “A rebound in operating performance of most IT companies as well as improvement in deal conversion rate in June quarter also added to the FPI interest.”
Tata Consultancy Services and Infosys, the country’s top two IT firms, surpassed June-quarter estimates and provided optimistic forecasts. However, Wipro was the only major IT company that fell short of expectations. In addition to IT, FPIs also invested in automobile, metals, and capital goods stocks, supported by consistent earnings momentum.
On the other hand, the financial sector experienced outflows of 76.48 billion rupees in July after reaching a six-month high in June. Analysts attributed this to moderating net interest margins and higher credit costs. ICICI Bank, Axis Bank, and State Bank of India missed June-quarter NIM expectations due to an increase in the cost of funds.
Despite the outflows in the financial sector, overall FPI inflows into Indian markets reached a four-month high of 323.65 billion rupees in July, as per NSDL data.
This marks the highest investment since the implementation of a new sectoral classification in 2022, which streamlined the total number of sectors from 35 to 22 after the NSE and BSE adopted a common industry classification system.The previous classification divided the IT sector into software, services, and hardware technology.
Analysts attributed the strong buying interest to the US Federal Reserve‘s comments indicating a potential rate cut starting from September, along with generally positive earnings reports. “We expect the start of the interest rate-cut cycle in the US to be a signal for clients to garner confidence on the inflation trajectory, which may drive demand recovery and an uptick in discretionary spending,” said analysts led by Dipesh Mehta of Emkay Global.
Prakash Thakkar and Sujay Chavan of Prabhudas Lilladher added, “A rebound in operating performance of most IT companies as well as improvement in deal conversion rate in June quarter also added to the FPI interest.”
Tata Consultancy Services and Infosys, the country’s top two IT firms, surpassed June-quarter estimates and provided optimistic forecasts. However, Wipro was the only major IT company that fell short of expectations. In addition to IT, FPIs also invested in automobile, metals, and capital goods stocks, supported by consistent earnings momentum.
On the other hand, the financial sector experienced outflows of 76.48 billion rupees in July after reaching a six-month high in June. Analysts attributed this to moderating net interest margins and higher credit costs. ICICI Bank, Axis Bank, and State Bank of India missed June-quarter NIM expectations due to an increase in the cost of funds.
Despite the outflows in the financial sector, overall FPI inflows into Indian markets reached a four-month high of 323.65 billion rupees in July, as per NSDL data.