Economy

Foreign Investors Purchase India’s IT and Pharma Stocks in August Amid US Rate Outlook, Reports Reuters

BENGALURU – Foreign investors showed strong interest in information technology and pharmaceutical stocks during August, buoyed by the anticipation of a possible interest rate cut by the Federal Reserve, as revealed by recent data.

Foreign portfolio investors (FPIs) also increased their stakes in consumer stocks, spurred by positive earnings momentum and expectations for a revival in demand due to consistent monsoon rains in India, according to figures from the National Securities Depository Ltd (NSDL).

After a significant investment of 117.63 billion rupees in IT stocks in July—the highest since the new sector classification was introduced in 2022—FPIs added 40.36 billion rupees in August for IT shares and acquired healthcare stocks worth 51.99 billion rupees.

As a result of these FPI inflows, the IT and pharma sub-indexes increased by 4.7% and 6.6% respectively in August, while the fast-moving consumer goods (FMCG) index saw a rise of 1.6%. This collectively lifted the benchmark Nifty 50 by 1.1%.

Growing optimism about increased technology spending in the U.S., combined with expectations of a stable economic environment, has attracted foreign interest in the IT and pharma sectors, according to VK Vijayakumar, chief investment strategist at Geojit Financial Services.

Consumer durables, services, and FMCG experienced inflows ranging from 36 billion to 50 billion rupees in August. Analysts noted that improving rural demand and a favorable macroeconomic outlook have revitalized interest in consumption-linked sectors.

“The silver lining is the growth in private consumption, which is showing signs of recovery and is reflected in the strong earnings performance of the sector during the June quarter,” remarked Ajit Banerjee, chief investment officer at Shriram Life Insurance. “The positive progress of the monsoon also fuels hopes for good agricultural output, which could further enhance rural demand,” he added.

Boosted by rising expectations of a U.S. rate cut in September, overall FPIs in Indian equities turned positive for August, reversing the outflows seen earlier in the month.

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