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“Foreign investors are pulling out of the IT sector because valuations are not cheap given that the companies are guiding for low growth or degrowth,” said Siddarth Bhamre, head of research, Asit C Mehta Intermediates. “Despite the time consolidation, the stocks could witness a further slide and are not a convincing buy.”
Overseas investors sold shares worth ₹10,541 crore across nine sectors in the first 15 days of July, according to data from NSDL. Fast-moving consumer goods (FMCG), auto and consumer durable sectors were among the other sectors that saw foreign investor withdrawals in this period.
“FMCG and consumer durables traditionally act as defensive plays during market corrections, but the recent pullback is likely a short-term phenomenon rather than a sign of sustained weakness,” said Bhavik Joshi, business head, INVasset PMS.
AgenciesBhamre said that FMCG might find some takers as the outflows are not significant, but the auto sector could see further selling.
“The FMCG sector is reasonably valued and offers low single-digit growth even though there were expectations of no growth a few quarters back,” said Bhamre. “The auto sector, however, can see a few quarters of struggle as the monthly auto numbers are not very encouraging.” Foreign investors bought shares worth ₹9,095 crore across 12 sectors in the first half of July. The services sector witnessed the highest inflows worth ₹2,733 crore after marginal inflows in June. Global investors purchased shares worth ₹1,724 crore in the metals sector after outflows worth ₹357 crore last month. “The metals sector has witnessed inflows, driven by India’s position as a key beneficiary amid China’s rare earth metals retaliation,” said Joshi. “This development has proven to be a positive trigger for stocks in this space.” Bhamre said that base metal prices are on an upward trajectory and the sector is cyclical in nature.
