Foreign portfolio investors turn tech-lite but analysts are positive

The biggest underweight for foreign portfolio investors (FPIs) in the information technology (IT) sector, where valuations are hovering around record levels. At the end of April, 13.5 per cent of FPIs’ total equity investment was in the IT sector. This is 390 basis points lower than the sector’s weighting in the MSCI India index, according to an analysis by Emkay Alternate and Quantitative Research.

Earlier, this year the trailing 12-month price-to-earnings (P/E) ratio for the Nifty IT index surpassed 30x for the first time.

Currently, the index trades at a P/E multiple of 28x versus historical average of 20x. Most analysts, however, are positive on the IT sector which has largely moved in lockstep with the benchmark Nifty so far this year.

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“The IT sector will be unaffected by the domestic challenges and might even benefit from acceleration in digitization initiatives undertaken by the Indian companies,”says a note by Axis Securities. Some say the UW stance by FPIs could provide a tailwind for the stocks in the sector.

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First Published: Mon, May 10 2021. 23:50 IST

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