Kamal Ghorui
Foreign portfolio investors once again turned towards Dalal Street to shop for Indian equities, spending in Rs 33,487 crore across 15 sectors, in the first half of February. The bulk of the inflows went into capital goods, financial services and oil & gas stocks, marking the strongest fortnightly buying seen since the second half of April 2025. Capital goods stocks attracted the highest inflows, drawing Rs 8,032 crore between February 1 and 15, compared with Rs 2,761 crore in January. The government’s Rs 4,470 crore stake sale in BHEL partly supported the sector’s momentum. “The capital goods sector has underperformed the market, and there was nothing negative in the budget on the sector which could have prompted global investors to reallocate funds,” said Siddarth Bhamre, head of Research, Asit C Mehta Intermediates told ET. According to Rajesh Singhla, CEO & fund manager at Alpha AIF, the US-India trade deal framework announced in the first week of February also lifted sentiment in segments such as capital goods, textiles, gems and jewellery, helping draw foreign money. Financial services witnessed a turnaround, receiving Rs 6,175 crore in the first fortnight of February after facing outflows of Rs 8,592 crore in January. Singhla said strong third-quarter earnings from banks and financial companies may have supported investor interest, although he noted that valuations in the sector remain unappealing. Foreign investors also bought Rs 4,678 crore worth of oil & gas shares during the period.Why is IT still failing to attract? Despite the broader buying, overseas investors continued to exit some sectors. They sold Rs 13,812 crore across eight sectors in the first half of February, with information technology bearing the brunt. IT alone accounted for more than Rs 10,000 crore of the outflows. The sector has been under sustained pressure in 2025, with nearly Rs 75,000 crore worth of shares offloaded so far, the highest among all sectors, amid concerns that AI-led disruption could affect the outlook for software services exporters. “Fears of AI making the sector less labour-intensive could spark further selling,” said Bhamre. “Overseas investors have shifted allocation from services to pockets in the real economy in this fortnight.” Market performance reflects the trend. The Nifty IT index has declined nearly 15% so far this year, compared with a 2.6% drop in the benchmark Nifty. Singhla, however, suggested the sell-off may have been excessive. “The foreign selling in IT stocks was due to fears of the earnings trending lower as the threat of disruptions due to AI loomed large, but most of the selling was sentimental, and the sell-off was an overreaction,” he said.
