Foreign Investors Boost IT and Pharma Stocks in August

BENGALURU (Reuters) – Foreign investors ramped up investments in information technology (IT) and pharmaceutical stocks in August, benefiting from a significant share of their revenue coming from the U.S., amid prospects of a potential rate cut by the Federal Reserve this month.

Data from the National Securities Depository Ltd (NSDL) shows that foreign portfolio investors (FPI) also increased their holdings in consumer stocks, driven by strong earnings and optimistic demand due to steady monsoons in India.

After investing 117.63 billion rupees ($1.40 billion) in IT stocks in July—the highest since a new sectoral classification in 2022—FPIs purchased 40.36 billion rupees worth of IT shares last month and 51.99 billion rupees worth of healthcare stocks.

Market Performance:
– IT sub-index rose by 4.7%
– Pharma sub-index increased by 6.6%
– FMCG index gained 1.6%
– The benchmark Nifty 50 went up by 1.1%

According to VK Vijayakumar, chief investment strategist at Geojit Financial Services, the rising expectations of increased technology-related spending in the U.S. amid a soft landing for the economy has attracted foreign interest in IT and pharma stocks.

Consumer Sector Gains:
Consumer durables, services, and fast-moving consumer goods (FMCG) benefited from FPI inflows valued between 36 billion rupees and 50 billion rupees in August. The revival of rural demand and a steady macroeconomic outlook stirred fresh interest in consumption-linked sectors, as noted by analysts.

Ajit Banerjee, chief investment officer at Shriram Life Insurance, remarked, “The silver lining is private consumption growth, which is showing signs of revival and reflecting in the strong earnings performance in the sector in the June quarter.” He added that the well-progressing monsoon ensures hopes for good agricultural output and improvement in rural demand.

Thanks to rising expectations of a U.S. rate cut in September, overall FPI inflows into Indian equities turned positive for August, reversing previous outflows in the first half of the month.

($1 = 83.9530 Indian rupees)