Foreign investors continued selling Indian stocks in the first half of March, especially in the IT and consumer goods sectors. Concerns about the economy in both India and the U.S. have contributed to this trend.
According to stock exchange data released on Thursday, foreign portfolio investors (FPIs) sold Indian shares worth $3.5 billion during this period. The IT sector suffered the most, with stocks worth ₹69.34 billion ($803 million) being sold, followed by the consumer goods sector, which saw $591 million in outflows.
Since October 2024, FPIs have sold a total of $28 billion in Indian equities, leading to a 13% drop in the Nifty 50 index from its record high on September 27, 2024. The IT index (.NIFTYIT) fell 3.2% in early March and officially entered a bear market on March 12 after dropping 20% from its recent peak. However, the broader Nifty 50 index (.NSEI) managed to gain 1.2% during the same period.
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IT Stocks Hit by U.S. Economic Concerns
The Indian IT sector, which earns a major portion of its revenue from the U.S., has been hit hard by global economic worries. Analysts say fears of a slowdown in the U.S. economy, rising inflation, and unpredictable trade policies under President Donald Trump have hurt investor confidence.
Investment firms have taken a negative view of the sector. Earlier this month, Jefferies downgraded Indian IT stocks from “overweight” to “underweight,” citing high valuations and risks linked to the U.S. economy. Citi also remained cautious, saying it is too soon to expect a recovery in the sector due to weak economic data from the U.S.
Consumer Stocks Still Struggling
Despite a 2.3% rise in the consumer goods sector in the first half of March, the sector is still struggling after losing 23% in the previous five months. Even though the government has introduced measures like tax cuts and liquidity-boosting steps by the Reserve Bank of India (RBI), investors are not fully convinced.
“Government subsidies and tax cuts help, but the consumer sector still lacks strong growth drivers and is expensive compared to other sectors,” said Amish Shah, an analyst at BofA India.
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Other Sectors Also See Foreign Outflows
Apart from IT and consumer goods, foreign investors have also pulled money out of financials, oil and gas, and auto stocks since October. These sectors have faced challenges due to both global economic uncertainty and domestic policy issues, making the Indian stock market more volatile.
Despite efforts by the Indian government and the RBI to boost economic growth, foreign investors are still cautious. With global economic stability in question and challenges within India’s market, the outlook for Indian stocks remains uncertain.
