The information technology (IT) and financials sectors witnessed the maximum selling pressure from foreign portfolio investors (FPIs) in the first fortnight of the new financial year, according to data from NSDL. Overall, FPIs continued to be net sellers for a fourth consecutive month (so far in April) and have taken out Rs 33,927 crore ($3.96 billion) from Indian equities.
The uncertainty around US President Donald Trump’s tariff threats, which saw big moves in the markets across the globe, is expected to hit the Indian IT sector as discretionary spends from companies may go down. In addition, there has been portfolio rebalancing by foreign players due to high valuations.
In the first 15 days of April, FPIs net sold Rs 27,945 crore ($3.2 billion) worth of equity in the IT sector and Rs 22,167 crore ($2.5 billion) in the financial services sector. This is the third consecutive fortnight that FPIs were net sellers in the IT sector.
Chirag Mehta, chief investment officer at Quantum Mutual Fund, said IT is the most linked sector to the US from an India perspective and there are concerns over discretionary spending.
Vinit Bolinjkar, head of research at Ventura Securities, said Trump’s policies on H1B Visas, weakening of the dollar and increasing layoffs in the US are also impacting the sector. He attributed the outflow in the financials sector to overall selling due to uncertainties.
Telecom continued to see traction despite the uncertainty due to its domestic nature and recorded net inflows of Rs 13,352 crore or $1.5 billion. Chemicals, textiles, and media also saw net inflows in the range of Rs 487-966 crore. Boljinkar said. China is the global exporter of chemicals and higher tariffs on it will be beneficial for India.
Mehta said as tariff implications are being assessed, we can soon see more reallocation to India due to its steady growth, which suits the interest of foreign investors. Valuation in the large-cap space has also corrected, he said. “BFSI is a sector we are liking, and we have good allocation to consumer discretionary.”