BENGALURU, Jan 17 (Reuters): Fund flows into India's information technology stocks both from local and global investors are expected to rise gradually over the next two quarters, led by growing optimism for a soft landing of the US economy and better-than-expected earnings, analysts said.
Shares of India's IT companies, opens new tab, which earn a significant share of their revenue from the US, surged 16.13 per cent in the final two months of 2023, exceeding the benchmark Nifty 50's, opens new tab 13.9 per cent gain.
Better-than-expected revenue growth from top IT companies such as Tata Consultancy Services, opens new tab and Infosys, opens new tab led to the outperformance of IT stocks over broader markets in January. The Nifty IT index gained about 4 per cent this month, in contrast to the 0.3 per cent drop in Nifty 50 index.
"We believe the IT sector is going through a classical sector rotation trade in favour of it," said Sanjay Bembalkar, co-head of equities at Union Mutual Fund.
"We expect investors, both foreign and domestic to increase allocations further on clarity over change in monetary policy stance in the U.S," he said.
About a third of the analysts covering IT companies in the Nifty 50 index hold an equivalent of "sell" or "strong sell" recommendation on the stocks, on average, according to LSEG data.
Foreign portfolio investors (FPI) made modest purchases of 9.08 billion rupees ($109.3 million) in fiscal 2024, a fraction of their total investment of 1.97 trillion rupees.
IT, with the second-highest sectoral weightage of 13.62 per cent in the Nifty 50 index, secured only a meagre 0.46 per cent of the total FPI purchases in the fiscal year so far.
© 2024 - All Rights with The Financial Express
