Foreign investors withdraw Rs 14,422 crore from IT stocks amid July sell-off

Economic Times

5 days ago

Foreign investors offloaded ₹2,425 crore in automobiles in the second half of July and sold over ₹1,300 crore each in consumer durables and construction.
Foreign investors heavily sold IT stocks in July, pulling out ₹14,422 crore due to weak quarterly results, headcount reductions, and global macroeconomic uncertainty. This selling pressure extended to other sectors, including financial services, oil and gas, and realty, as investors trimmed exposures and booked profits. Concerns about potential NPA increases in export-oriented sectors further influenced investment decisions.
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Mumbai: Information Technology (IT) stocks continued to bear the brunt of foreign selling, with outflows of ₹14,422 crore in the second half of July. These investors pulled over ₹5,000 crore from the sector in the first 15 days of the month.Between January and June, the sector saw foreign outflows of ₹30,600 crore.Although the tariffs currently don't apply to services, the IT sector remained under pressure due to weak June-quarter numbers across the board and significant headcount reductions, said analysts."The valuations in the sector have not yet fully factored these headwinds in addition to the global macro-economic uncertainty," said UR Bhat, co-founder & director, Alphaniti. "Foreign investors are trimming their exposure because IT is one of the sectors with their maximum weightage."The Nifty IT Index fell 11.8% in the last month, against a 4.5% drop in the benchmark Nifty. Foreign investors sold shares worth ₹34,974 crore across 12 sectors in the last 15 days of July, NSDL data showed. These investors dumped ₹6,720 crore in financial services after buying ₹8,946 crore in June."Though the quantum of selling is relatively lesser compared to the buying seen in the earlier three months, FPIs seem to have partially squared off their bullish bets in the index," said Sudeep Shah, vice president and head of technical and derivative research, SBI Securities.Bhat said banks with large exposure to export-oriented sectors such as chemicals, textiles, gems and jewellery, and auto parts could see an uptick in NPAs due to the tariffs. "Overseas investors are likely to be selective on the scrips that they buy," he said.Oil and gas and realty sectors saw foreign outflows of ₹4,177 crore and ₹3,684 crore, respectively, in the second half of the month.Profit booking in Reliance Industries, the stock with the highest weight in the Oil & Gas Index, weighed on sentiment in the period, said Shah."The global implications are significant on the oil markets if India stops buying crude oil from Russia and the uncertainty is weighing heavily on the outlook for these stocks leading to outflows," said Bhat.Foreign investors offloaded ₹2,425 crore in automobiles in the second half of July and sold over ₹1,300 crore each in consumer durables and construction.