FPIs sold Rs 16,000 crore worth of IT stocks in May amid volatility in rupee

Month of May was particularly bad for IT stocks, as reflected in about 6 per cent drop in Nifty IT index. The main reason for such a fall is now crystal clear – data released by NSDL shows foreign portfolio investors (FPIs) sold stocks worth over Rs 16,000 crore from the sector amid volatile rupee.

Foreign investors have been bearish on Indian markets for a multitude of reasons, including inflation and weakening rupee. IT stocks are among those names that have the largest concentration of foreign investor holdings thus, they were battered blue in May.

and L&T Tech Services were among the biggest losers, down 14 per cent each. Both L&T group companies have decided to merge together to become one entity. Another stock from the same group – Larsen & Toubro Infotech was another big loser, down 12 per cent.



Among other big losers of the month were (down 9 per cent), (down 7 per cent), (down 6 per cent) and (down 6 per cent).

The IT sector was followed by the financial services sector in terms of FPI selling in May. They sold shares worth Rs 12,000 crore during the month. Bank and financial stocks have underperformed for many months now. They have the biggest weight in the benchmark indices, which means selling in them impacts the entire market. Though fall in Nifty Bank and Nifty Financial Services was not pronounced during May as much of the selling was absorbed by domestic investors.

Oil, gas and consumable fuels (Rs 3,568 crore), metals and mining (Rs 2,752 crore), consumer durables (Rs 2,705 crore), consumer services (Rs 1,722 crore), construction materials (Rs 1,450 crore), automobile and auto components (Rs 1,398 crore) and construction (Rs 1,175 crore) were other sectors that saw big FPI selling.

Overall, FPIs sold net Rs 39,995 crore worth of equities in May, NSDL data shows.

Analysts don’t see much respite from FPI selling as headwinds have persisted. “One predictable trend in India is that FPIs will continue to sell on every rally,” said V K Vijayakumar, Chief Investment Strategist at

.

For the market May was another rough month. The Nifty and the Sensex recovered quite a bit from their respective intra month lows but still finished lower by 3 per cent and 2.6 per cent respectively. Broader market performance was significantly weaker with the Nifty Midcap 150 and the Nifty smallcap 250 indices losing 5.2 per cent and 8.6 per cent, respectively, for the month.

Analysts say rising prices and the challenge it poses for policy makers continue to be major headwinds for risk assets globally. Higher rates impact equity valuations adversely.

higher inflation and rates may also adversely impact demand, margins, and hence corporate earnings.

“This is already reflecting in earnings downgrades outweighing upgrades in India with nearly 3 in 4 stocks seeing earnings being revised downwards. This is consistent with the continuing deterioration in market breadth,” said

Mutual Fund in its monthly note.

“The near term therefore stays challenging. We however continue to see the interim turbulence as an opportunity to add on to pro-economy assets to benefit from a long-term manufacturing/capex led upcycle on the other side of the current inflation challenge,” it added.

There were some sectors that saw buying as far as FPI are concerned. They bought Rs 2656 crore worth of services sector stocks, followed by Rs 2307 crore worth of power sector stocks. Chemicals, capital goods and forest materials also saw some buying.

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