Indian Tech Stocks Draw Record Overseas Inflows Of $1.4 Billion On Positive FY25 Guidance

The tech companies reported their highest-ever monthly investments from foreign portfolio investors in July, according to data provided by National Securities Depository Ltd.

Overseas investors pumped in $1.4 billion in the technology sector last month, according to data compiled by NDTV Profit from the markets regulator and depository firm. That’s the highest monthly inflows that the sector has witnessed since March 2012­­—when the Securities and Exchange Board of India and NSDL started recording the data of sector-wise inflows and outflows from FPIs.

Over three-fourths, or about $1 billion, of the inflows in the sector came during the second half of the month. This compares to a total inflow of over $3.8 billion during July.

Inflows in the sector coincided with stock movement in the tech stocks, as the IT benchmark NSE Nifty IT rose nearly 11%, while the NSE Nifty 50 rose by a mere 3.3% during the month.

The rally in the index was led by Infosys Ltd. which climbed over 17%, followed by Mphasis Ltd. and Coforge Ltd. which surged by 16% and 14%, respectively, during the month.

IT bellwether Infosys anticipates a revenue increase of 3-5% for fiscal 2025, up from its previous expectation, while Tata Consultancy Services Ltd. reaffirmed its margin levels of 26-28%. HCL Technologies Ltd. also affirmed its projections for revenue growth and operating margin for financial year 2025.

Meanwhile, post the first quarter results, the IT sector has witnessed a broad wave of downgrades in the companies' earnings per share estimates since the beginning of the earnings season.

However, amid the general trend of downgrades, Infosys emerged as a standout performer with its 12-month forward EPS upgraded by a substantial 19.3%.

Global funds have offloaded nearly all of the stocks they purchased in June as they witnessed an outflow of $913 million, the highest sector outflow in July.

While metals, mining, and automobile sectors saw inflows, sectors like power and construction saw outflows during the month.

The fifth-largest stock market in Asia attracted overseas investments worth $2.67 billion in July. It is worth noting that it was on July 23 that there was a hike in the long and short-term capital gains tax along with an increase in the securities transaction tax.

Going forward, some developments can impact FPI flows, according to V K Vijayakumar, chief investment strategist, Geojit Financial Services Ltd.

The sharp drop in job creation in the US and the rising unemployment indicates there is a very high possibility of a rate cut by the Fed in September, he said. Even though this is positive for FPI inflows into emerging markets like India, overseas investors may think of pulling more money out of the country as it is the most expensive emerging market now, Vijayakumar said.