FPI AUC in India hit by ₹2 trillion IT slump; financials cushion impact

The Nifty IT index has fallen by 19.8 per cent so far this year, the worst among key sectors. During the same period, Nifty has risen by 5.5 per cent

Global funds’ assets under custody (AUC) in India have been flat this year, with a Rs 2 trillion drop in information technology (IT) holdings offset by gains in financial stocks.

 

AUC is the total market value of equities held by FPIs. The AUC of the IT pack stood at Rs 5.3 trillion as of July end: a 27.2 per cent decline compared to Rs 7.3 trillion at the end of 2024, according to data from NSDL. The plunge in holdings follows a Rs 50,000 crore selloff by foreign portfolio investors (FPIs) this year amid a muted outlook for the IT sector.

 

The Nifty IT index has fallen 18 per cent this year, the worst among key sectors. Nifty has risen by 6 per cent. The fall in the asset value of global funds can be a result of a selloff by global investors, currency depreciation and a fall in asset prices.

 

The decline in AUC of IT stocks is largely due to selling by FPIs rather than mark-to-market value erosion, said G Chokkalingam, founder of Equinomics Research. “The price fall in recent months has not been significant enough to explain the drop, so it is more to do with actual selling.”

 

Sandip Agarwal, fund manager at Sowilo Investment Managers, said largecap IT companies such as Tata Consultancy Services, Infosys and HCL Technologies are struggling to generate annual revenue growth of more than 3 per cent to 7 per cent as their stocks trade at 15-25 times forward earnings.

 

 

Increasing wage costs and the impact of artificial intelligence are further eroding the sector's growth potential, Agarwal said. IT stocks have a higher weight and are more liquid, so selling is naturally more aggressive, he added.

 

Apart from heavyweight IT stocks, the value of FPIs’ holdings in consumer durable companies fell 13 per cent to Rs 2.18 trillion, while realty stocks value declined 18 per cent to Rs 1.7 trillion.

 

Some Indian investors regard IT stocks as similar to fast-moving consumer good (FMCG) companies, which too show no growth, Agarwal said. “Some fund managers argue that if IT is available at 15-20 times earnings for the same 5 per cent growth, it could eventually become more attractive than FMCG,” he added.

 

 

Financial stocks offset impact

 

On the positive side, FPIs’ holdings in financial services stocks rose 11 per cent (Rs 2.27 trillion) to Rs 22.7 trillion as of July end. Holdings in telecommunications increased 28 per cent to Rs 3.49 trillion. The overall FPI AUC saw a marginal increase of 1 per cent from December 2024 to Rs 71.9 trillion in July 2025.

 

“Most private banks are becoming strong proxies for India’s gross domestic product (GDP) growth while remaining reasonably valued,” said Agarwal. “That’s why FPIs continue to rotate money into the financial sector, especially private banks, and this trend is likely to sustain.”

 

FPIs favour financial services as the sector promises 9-10 per cent lending growth, benefits from a likely downtrend in interest rates, and is driven by domestic demand rather than US trade, Chokkalingam said. Attractive valuations, with banks and financial firms trading at relatively low price-to-book multiples, add to its appeal, he said.

 

The Nifty PSU Bank index and Nifty Private Bank index trade at a price-to-book value of 1.05 times and 2.1 times, respectively.