Rs 9,000 crore-selloff! Infosys, Tech Mahindra on top of FII hate list in Q1

The June quarter shareholding pattern data shows that FIIs pared their stake in Infosys by another 165 bps to 33.44%. In the case of Tech Mahindra, which will report its Q1 results on Wednesday, FII holding went down by 118 bps to 25.69%.

Out of the 10 Nifty IT stocks, Wipro, which underwent a share buyback in June, and HCL Technologies are the only two counters where FIIs saw some hope as their holding went up marginally by 6-7 bps.

On the other hand, mutual funds were not as bearish on largecap IT stocks. In Infosys, MF ownership increased from 18.28% to 18.63% at the end of the June quarter. Domestic fund managers raised stakes in TCS and LTIMindtree.

Wipro saw MF holding going down to 2.39% from 2.79% while HCL Technologies had MFs decreasing their stake by 17 bps to 7.98%.

In the case of Tier-II IT stocks, MF ownership increased in Coforge, LTTS and Persistent Systems. FIIs reduced stakes in all of them.

So far in FY24, Infosys, which faced investor fury on Friday following guidance cut, is the only Nifty IT stock that has given a negative return (of around 7%).

Tier-II IT stocks like Coforge (up 21.5%), LTTS (20%) and Mphasis (30%) have been clear winners this financial year.

While TCS’ June quarter numbers did not lead to upgrades and Wipro gave weak guidance, investors have been taking solace in deal wins. Despite the uncertain macro environment, TCS reported a strong order book at $10.2 billion (up 2% QoQ and 24.4% YoY) while Wipro’s TCV came in at a decent $1.2bn (9% YoY growth).

“The current disconnect between the growth in bookings and soft revenue growth is largely due to the impact on discretionary services. Contract activity was stronger in the EMEA region (five of the 10 mega deals in EMEA), which corresponds with commentary by tier-1 IT services,” said HDFC Securities analyst Apurva Prasad.

Although more pain is expected in the near term, the long-term growth outlook of the IT sector remains intact, backed by increasing global adoption of digital technologies.

“When compared to other sectors, IT stocks are considered attractively valued, creating investor interest. Also, the robust performance of the global IT sector, underpinned by strong demand from both developed and emerging markets, further buttresses the position of India’s IT stocks,” said smallcase manager Sonam Srivastava of Wright Research.

Additionally, the Indian IT sector’s recent wins of significant deals have been a catalyst, augmenting investor sentiment. Encouraging commentary and positive future projections from IT companies’ management teams are also fortifying investor optimism, she said, adding that amid the positive outlook, investors should be mindful of potential dampeners such as rising interest rates and geopolitical uncertainties.

(With data inputs from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)