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

Mumbai: Information Technology continued to bear the brunt of foreign selling as overseas 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 consecutive month, and foreign investors have dumped shares worth over ₹70,000 crore between January and October.

“Historically, when the IT sector has underperformed, the valuations in the sector have come off; however, this time the valuations continue to be relatively high despite weak earnings,” said Siddarth Bhamre, head of research, Asit C Mehta Intermediates. “This is prompting foreign funds to move out of the sector.”

While the valuations in the IT sector could be a factor in the foreign sell-off, the global outperformance of AI companies could also have dimmed the outlook on the sector, said analysts.

“Globally, the AI-based companies are massively outperforming, while the major Indian listed IT companies have little, if any, exposure to AI and are largely into services, which are likely to be replaced by AI,” said U R Bhat, co-founder & director, Alphaniti. “This could be why they are reducing holdings in the sector.”

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

“Foreign investors are anticipating the outcome on the US-India trade deal soon but are disappointed with delays,” said Bhat. “This drives them to lighten their holdings across sectors.” In the first half of November, global investors purchased shares worth ₹9,413 crore in the telecommunication 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 & gas and the category earmarked as ‘Others’ witnessed foreign purchases worth ₹2,992 crore and ₹1,446 crore, respectively, in the first half of the month. Analysts said foreign inflows in October could be a blip in the larger selling trend.

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