Kolkata: The impact of AI on traditional IT companies and the meltdown of the latter hit the headlines in the past fortnight. But some other sectors such as capital goods, financial services, and energy sectors were also impacted by the FIIs, who also invested in some sectors. Let’s have a look at the sectors which were impacted, both positively and negatively by the sellout and fresh buying by foreign investors.
Why the pressure on IT?
It began with the US firm Anthropic which demonstrated how by deploying AI, ERP solutions and other projects work that traditional IT companies would take weeks and months to would could be performed in a jiffy. Predictably, it threw the entire headcount-based model of companies such as TCS and Infosys under a cloud and investors panicked in similar stocks in the Us market. The contagion spread to India and FIIs began selling IT bellwethers massively dirving down the costs of these stocks by 3-6% in a single session.
Between February 1 and 15, FII investment in the IT sector declined to approximately ₹4.49 lakh crore, a decline of approximately 16% compared to the end of January. FII investment, which once peaked at approximately ₹7 lakh crore, is now on a continuous downward trend. This clearly indicates that foreign investors have increased selling in this sector. Increasing competition in the global tech space, uncertainty around AI, and potential regulatory or cost-related challenges have made investors cautious.
Which sectors suffered selling?
FII outflow data during February 1–15 shows major sellout took place in the following sectors:
IT: Rs 10,956 cr
FMCG: Rs 1,182 cr
Healthcare: Rs 1,051
Consumer Durables: Rs 434 cr
Telecom: Rs 106 cr
Which sectors saw fresh buying?
The following sectors witnessed fresh buying by the FIIs:
Capital Goods: Rs 8,032 cr
Financial Services: Rs 6,175 cr
Oil & Gas: Rs 4,678 cr
Metals & Mining: Rs 3,279 cr
Power: Rs 3,272 cr
Construction: Rs 1,745 cr
Services: Rs 1,286 cr
Consumer Services: Rs 1,066 cr
Realty: Rs 786 cr
Chemicals: Rs 642 cr
Auto: Rs 511 cr
Construction Materials: Rs 378 cr
These figures clearly indicate that foreign investors are turning to capital-intensive and cyclical sectors, especially those related to infrastructure, energy, and financial services.
What’s next?
The IT sector is currently going through a difficult phase. Investment in AI-based technology is becoming essential, but the associated costs and competition may create short-term pressure. Meanwhile, increased investment in sectors such as infrastructure, energy, and financial services indicates that foreign investors are reposing confidence in India’s domestic growth story and capex cycle. The outflow from IT and increased investment in capital goods and financials signal a shifting investor outlook.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals, commodity, REITs, InvITs and any form of alternative investment instruments and crypto assets.)
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