Tech Shares Witness Highest Monthly Foreign Fund Outflows In Nearly Two Years

Information & technology stocks witness an outflow generally when rate cuts become uncertain in US. IT stocks, however, have risen a bit with talks of rate cuts resurfacing in the US, says Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors.

"Ultimately, I feel US would go for rate cuts either by end of the year or the beginning of new year, which would take IT stocks up. So an opportune time to buy them on dips", Bhansali elaborated.

Foreign investors sold about $1.04 billion worth of equities in April. That comes as the NSE Nifty IT Index declined nearly 5% last month as compared to 1.2% gains in the country’s benchmark—NSE Nifty 50.

The markets are at record highs and there has been a pre-election rally. "It is not as strong as in the past. ⁠More than anything else, FPIs will respond to changes in the US bond yields. If the US bond yields fall and the Indian economy and markets do well they will turn aggressive buyers," to VK Vijayakumar, chief investment strategist, Geojit Financial Services.

The rise seen in India's volatility index or VIX show that the market can see turbulent weather in the short-run. "⁠Fed’s decision indicates rate cuts much lower-than-expected earlier this year. Inflation has turned stubborn at lower levels and the latest jobs data in the US indicates a slowing economy and, therefore, rate cuts may be necessitated," Vijayakumar added.

The optimism is still high though. "India seems to be in a different league altogether, and I do not expect any downside in in-flows after elections unless we have a very adverse outcome. So flows will continue post elections," Bhansali added.

IT shares were followed by the financial services sector, where foreign portfolio investors cashed out approximately $1.12 billion worth of shares, according to the NSDL data.

Details of foreign investments and divestitures for individual shares were not available immediately. However, on April 9, Bain Capital divested its entire 3.33 crore shares in Axis Bank Ltd. for Rs 3,566 crore in the open market. The buyers of the divested shares include Societe Generale, Morgan Stanley's Singapore unit, Goldman Sachs' Singapore unit and BofA Securities.

Citigroup Global Markets Mauritius bought 66.97 lakh shares or 1.11% equity stake in RBL Bank Ltd. on April 9, while Copthall Mauritius Investment sold 66.97 lakh shares or 1.11% equity stake.