Foreign investors offload India's financials, IT stocks in April, NSDL data shows

A bird flies past the Bombay Stock Exchange building in Mumbai

BENGALURU (Reuters) - Foreign investors offloaded financials, information technology and consumer stocks in April, data from the National Securities Depository Ltd (NSDL) showed on Tuesday.

Foreign portfolio investors (FPI), who bought 2.08 trillion rupees worth of Indian shares in the 12 months ending March, sold shares worth 86.71 billion rupees in April, amid concerns over delays in interest rate cuts in the United States.

However, the FPI selling was cushioned by domestic investors' purchases, with the benchmarks Nifty 50 and S&P BSE Sensex gaining 1.24% and 1.13%, respectively.

"Foreign inflows would stagnate if the U.S. Federal Reserve continues to hold rates higher for longer," said Sreeram Ramdas, vice president at Green Portfolio.

Recent hotter-than-expected U.S. inflation and labour market data have dampened hopes of early rate cuts. Markets now expect a rate cut only from September, compared with hopes of a June rate cut earlier.

Indian markets were resilient in April despite relentless FPI selling due to strong domestic institutional investors' (DII) inflows, Ramdas said, adding plenty of domestic liquidity is waiting on the sidelines and could keep markets stable.

Among individual sectors, the highest-weighted financials and U.S.-rate sensitive IT saw outflows of 93.38 billion rupees and 95.73 billion rupees, respectively.

Financials still rose 4.06% in April, their best monthly performance in 2024, boosted by strong earnings.

However, IT companies, which reported lacklustre March-quarter results, dropped 4.86%.

A weak outlook on client spending in the U.S. and tepid demand could have spurred FPI outflows from IT, while any FPI trend reversal would reflect on financials as foreign investor ownership is highest in the sector, said Anil Rego, founder and fund manager at Right Horizons.

Consumer stocks also saw outflows of 79.14 billion rupees.

Rural demand recovery has been a worry for consumer stocks and could spur further outflows, said Sunny Agrawal, head of fundamental equity research of SBICaps Securities.

(The story has been refiled to correct to NSDL from NDSL in paragraph 1)

(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Sohini Goswami)