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In January 2024, Indian equity markets experienced significant outflows, as foreign institutional investors (FIIs) withdrew $2.62 billion from the market. This marked the highest monthly outflow since January 2023. 

During the initial half of January 2024, FPIs displayed a buying trend, amounting to $417 million. However, the latter half of the month saw a reversal, with FPIs engaging in substantial selling activities, totaling approximately $3,514 million. 

The overall selling by FPIs in January 2024 amounted to ₹6,593 crore or $791 million, encompassing various funds, including debt, hybrid, debt-VRR, and equities. 

Several factors contributed to the equity sell-off in January 2024, particularly in the second half of the month. Concerns arose ahead of the Federal Reserve policy statements, and the quarterly results of Indian companies revealed one of the slowest rates of top-line and bottom-line growth in the past 12 quarters.

These factors, coupled with some caution surrounding the Interim Union Budget of 2024, influenced the sentiments of FPIs. 

Here are the top sectors that saw significant FPI inflows in January 2024.

Information Technology Sector 

The IT industry contributed 7.4 percent of India’s GDP in FY22 and is expected to contribute 10 percent by 2025. India’s IT spending is anticipated to rise to US$ 110.3 billion in 2023, up from an estimated US$ 81.89 billion in 2021. 

In January Month, FII capital inflows into the Information Technology sector were ₹4,485 crore, down from ₹ 5,185 crore in December of 2023. 

The S&P BSE IT index climbed 3.7 percent in January month. 

Here are the major IT stocks in this sector such as TCS, Tech Mahindra, LTIMindtree, and Infosys. 

Oil and Gas sector

India is the third-largest energy and oil consumer in the world. The country’s oil demand is expected to increase by 40% to 6.7 mb/day by 2030 and further to 8.3 mb/day by 2050. 

The Government has adopted several policies to fulfill the increasing demand. It has allowed 100% foreign direct investment (FDI) in many segments of the sector, including natural gas, petroleum products, and refineries, among others. 

The FDI limit for public sector refining projects has been raised to 49% without any disinvestment or dilution of domestic equity in existing PSUs. The industry is expected to grow at a CAGR of 5.20% by 2029. 

Oil & Gas has also been seeing FPI interest due to oil prices stabilizing globally.FPI inflow in the financial services sector was ₹ 3,492 crore in January month, after net selling of ₹ 542 crore in January. The S&P BSE OIL & GAS Index has risen 11.85 percent in the January month. 

Oil and Gas sector constituents include Indian Oil Corporation Ltd, Reliance Industries Ltd, Oil & Natural Gas Corpn Ltd, Bharat Petroleum Corporation Ltd, GAIL (India) Ltd, Indraprastha Gas Ltd 

Telecommunication sector 

India’s Telecom industry is the second largest Industry in the world with a subscriber base of 1.182 Bn as of October 2023. For the growth of the sector Indian government has implemnted a PLI scheme worth ₹12,195 crores for the manufacturing of telecom and network products.

Incentives worth more than ₹ 4,000 Cr have been earmarked for the Design Led Manufacturing Scheme of the existing PLI Scheme. 

As per the Mordor Intelligence report, the Indian Telecom sector is to grow at a CAGR of 9.40%.by 2029. The Telecom sector is subdivided in different categories such as infrastructure equipment, White Space Spectrum, Mobile virtual network provider,5G, Telecom and Broadband providers. 

In January Month, FII capital inflows into the Telecommunication sector were ₹2,577 crore, up from ₹ 290 crore in December of 2023. 

The S&P BSE Telecommunication index climbed 6.9 percent in January.

Here are the major IT stocks in this sector such as Idea,Railtel Corporation of India Ltd,OnMobile Global Ltd,Bharti Airtel Ltd,Tejas Networks Ltd,Indus Towers Ltd. 

Written by Omkar Chitnis

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