New Delhi: The technology sector in India bore the brunt of the FPI outflows in the last fiscal year, with foreign investors pulling out Rs 51,138 crore of net investments from the IT sector, the Hindu BusinessLine reported.
The outflows were the highest among all sectors in FY23, the report added.
Crisil’s senior director, Anuj Sethi, told the business daily, “Headwinds in key markets, particularly the BFSI (banking, financial services and insurance) segment in the US and Europe, will affect the revenue growth of domestic IT services companies.”
In FY22, the software services sector was the second biggest loser of FPI money with a net outflow of Rs 49,660 crore, the report added.
So in two years, FPIs pulled out over Rs 1 lakh crore from the Indian IT sector.
Market experts told the business daily that the massive outflows from the IT sector are due to concerns over the global economic slowdown and likely cutback on spending by IT companies in developed economies.
Oil and gas and banking and financial services sectors also saw net outflows of Rs 37,674 crore and Rs 29,921 crore, respectively, in FY23.
On the other hand, foreign investors were net buyers in the capital goods sector (Rs 17,419 crore) followed by FMCG (Rs 17,180 crore) and healthcare (Rs 16,145 crore).
“FMCG is always a safe defense in India. Capex revival augurs well for the capital goods segment in this capex cycle. Of late, healthcare has received a shot in the arm from the re-emergence of COVID-19 in parts of the country,” said Vijayakumar.
Meanwhile, FPIs continued their sell-off in the financial year 2022-23, too, pulling out Rs 37,631 crore from Indian equities, amid rising global interest rates, the Economic Times reported.
In FY22, FPIs pulled out Rs 1.40 lakh crore from Indian equities, the Hindu BusinessLine reported.
When there is excess liquidity in the markets, due to low interest rates, foreign investors put their money into emerging markets such as India. But with rising interest rates, which aims to tighten money supply in the market, foreign investors pull out their money from emerging markets.
Moreover, according to experts, the Indian market is overvalued.
“Relatively high valuations of the Indian market prompted FPIs to continuously sell in India. China reopening also triggered selling in India and buying in China,” V.K. Vijayakumar, chief investment strategist, Geojit Financial Services, told the business daily.
“Indian market valuations are more than 120% premium to emerging market index. It is tough for this to sustain,” market expert Sandip Sabharwal had told the Economic Times in September 2022.