FIIs reduced their investment in IT firms in Q1, although Wipro and HCL Tech remained strong

Foreign institutional investors (FIIs) decreased their ownership in Infosys, the second-largest software services company in India, from 35.08% to 33.43% in the June quarter. For the second straight quarter, FIIs have decreased their ownership of the Bengaluru-based company.

In light of a difficult demand environment, Infosys reduced its revenue guidance for FY24 to 1-3.5% from 4-7% when it released its June quarter earnings.

The largest software exporter in the nation, Tata Consultancy Services (TCS), had a decline in FII holdings in the June quarter, from 12.72% to 12.4%. This is the eleventh quarter in a row that FII holdings have decreased.

Additionally, Tech Mahindra Ltd. had a decline in FII holdings of almost 100 basis points, dropping it to 25.69% from 26.87% in the previous quarter. This is the tenth straight quarter that foreign investors have reduced their holdings in Tech Mahindra.

The CEO of Tech Mahindra, CP Gurnani, said the June quarter as one of the most challenging in the previous five years as the company's net profit fell 38% to Rs 692 crore.

One basis point is one-hundredth of a percentage point.

During the June quarter, foreign investors also sold shares in other IT companies like Coforge Ltd, L&T Technology Services Ltd, LTIMindtree Ltd, Mphasis Ltd, Affle India, Birlasoft Ltd, and Persistent Systems Ltd.

It was the second consecutive quarter of FII selling for Persistent Systems Ltd, L&T Technology Services Ltd, and LTIMindtree, but the third consecutive quarter of FII outflows for Mphasis Ltd.

However, Wipro Ltd. and HCL Technology bucked the trend by reporting a surge in foreign funds flow. For the third successive quarter, FII increased its stake in HCL Tech, and Wipro the second consecutive quarter.

Cyient Ltd, KPIT Technologies Ltd, Zensar Technologies Ltd, Sonata Software Ltd, and Tata Elxsi Ltd are further midcap IT firms that experienced FII acquisition.

Foreign institutional investors (FIIs) are selling due to weak results reported by numerous IT firms in both the March and June quarters.

Analysts anticipate a worldwide slowdown, which would likely reduce IT investment in the United States and Europe. Given that these regions account for over 40% of Indian IT firms revenue, there are worries regarding the companies' performance.

According to Kotak Institutional Data, FIIs have withdrew around $2.12 billion from the IT sector so far in 2023. In 2022 and 2021, they remained net sellers, selling stocks valued around $9.27 billion and $3.23 billion, respectively.

Source: Media Reports