Foreign selling of Indian stocks continued in the first half of March, with IT and consumer goods sectors being the most affected, amidst concerns about the US and Indian economies.
According to exchange data, Foreign Portfolio Investors (FPIs) sold Indian stocks worth $3.5 billion during this period. IT stocks saw sales amounting to 69.34 billion rupees ($803 million), while consumer stocks worth $591 million were offloaded.
Cumulatively, FPIs have sold Indian shares worth $28 billion between October and March, leading to a 13 per cent decline in the Nifty 50 index from its record high in September 2024.
The IT index experienced a 3.2 per cent drop in the first half of March, contrasting with the 1.2 per cent rise in the Nifty 50 index. The IT sector officially entered a bear market on March 12, with concerns about a potential slowdown in the US economy and inflationary pressures due to President Donald Trump’s tariff policies dampening earnings outlook in the sector.
Jefferies recently downgraded India’s IT sector to “underweight” from “overweight”, citing high valuations and US economic risks. Citi also expressed caution, stating that it is too early to be bullish on IT given the challenging near-term outlook based on recent US data.
Despite recent policy measures in India such as tax cuts and interest rate reductions by the Reserve Bank of India, investor interest has not been sparked. The FMCG index did see a 2.3 per cent increase in the first half of March, following a 23 per cent decline over the previous five months.
Analysts led by Amish Shah of BofA India noted that while the benefits of government subsidies and tax cuts are understood, the FMCG sector lacks additional catalysts and appears overvalued relative to other sectors.
Foreign outflows have been highest in financials and oil and gas sectors since October, followed by consumer and auto stocks. The market sentiment remains cautious amid economic uncertainties both domestically and globally.
