FPI buying in Indian IT rises to highest since 2022 in July: NSDL data

Foreign portfolio investors (FPIs) net bought Indian IT stocks worth 117.63 billion rupees ($1.40 billion) in July, data from National Securities Depository (NSDL) showed, the highest since a new sectoral classification was implemented in 2022.

The NSDL had re-classified sectors in April 2022, trimming the total number of sectors from 35 to 22 after India's stock exchange NSE and BSE adopted a common industry classification system.

Prior to this, the IT sector was divided into software, services and hardware technology.

The buying interest was driven by U.S. Federal Reserve's comments signalling the likelihood of a rate cut starting from September along with largely upbeat earnings, analysts said.

"We expect the start of the interest rate-cut cycle in the U.S. to be a signal for clients to garner confidence on the inflation trajectory, which may drive demand recovery and uptick in discretionary spending," said analysts led by Dipesh Mehta of Emkay Global.

"A rebound in operating performance of most IT companies as well as improvement in deal conversion rate in June quarter also added to the FPI interest," said Pritesh Thakkar of Prabhudas Lilladher.

The country's top two IT firms, Tata Consultancy Services and Infosys beat june-quarter estimates and delivered upbeat forecasts.

Among the top IT companies, only Wipro fell behind expectations.

Besides IT, FPIs also mopped up automobile, metals and capital goods stocks, helped by sustained earnings momentum.

However, financials faced outflows worth 76.48 billion rupees in July after hitting a six-month high in June, which analysts attributed to moderating net interest margins and higher credit costs.

ICICI Bank, Axis Bank and State Bank of India missed June-quarter NIM expectations due to an increase in cost of funds.

Overall FPI inflows in Indian markets rose to a four-month high of 323.65 billion rupees in July, NSDL data showed.