IT and Pharma Sectors Anticipated to Garner the Lion's Share of FII Inflows

As foreign institutional investors (FIIs) recalibrate their portfolios in light of shifting interest rates, there is a growing consensus that certain sectors will emerge as predominant beneficiaries of this trend. Notably, the information technology (IT) and pharmaceutical sectors are poised to attract a substantial portion of FII inflows in the foreseeable future.

FII Stake Shifts in Major IT Firms

Scrutiny of the IT sector reveals that several bellwether companies have observed their FII stakes linger 2-3 percentage points beneath their zenith holdings, which were noted during the period of interest rate hikes. Specifically, the stocks of premiere Indian IT firms such as Wipro WIPRO, Tata Consultancy Services TCS, LTIMindtree LTI, and Infosys INFY demonstrate this trend. Tech Mahindra TECHM, in a notable deviation, displays a more pronounced gap, with its FII stake deviating by as much as 9 percentage points from its peak.

Rate Cycle Modulations and IT Sector Revival

Industry analysts project that the turning point in the rate cycle could potentially herald the resumption of significant deal acquisitions, particularly from large clients within the IT sector. Consequently, this anticipates a surge in financial inflows directed towards IT firms that have historically constituted the core of FII investment strategies.

Pharma Sector: An Emerging FII Target

Parallel to the IT industry, the pharmaceutical sector is also expected to receive heightened interest from foreign institutional investors. The pharma industry's resilience throughout various market cycles, along with its potential for steady growth, makes it a strategic target for FIIs looking to capitalize on sectors with long-term profitability prospects.

IT, pharma, FII