As large-cap IT stocks such as Infosys, Wipro, HCL and Oracle Financial Services fell between 12 and 20 per cent during the June–September period, domestic institutional investors (DIIs) went cherry-picking and raised their holdings to multi-quarter highs.

While foreign institutional investors (FIIs) pared shareholdings in large-cap IT stocks, DIIs like mutual funds and insurance companies hiked stakes in all of them, barring TCS. So, even as a section of investors remained worried about the health of large IT firms due to the European economic crisis and the US slowdown, DIIs seemed to be keeping faith in them.

DII holding in the country’s second largest software services firm Infosys went up to 10.72 per cent from 9.84 per cent during the September quarter. This is the highest DII holding in the Bangalore-based IT giant in over 10 quarters.

“We are a bit contra on large-cap IT stocks. People were expecting bad things. But when you see the results for the September quarter, are they that bad? We don’t think so. We are not discounting the worries, but some large-cap IT stocks have solid businesses,” said Kaushik Dani, Mumbai-based equity fund manager with Peerless Mutual Fund.

FIIs reduced stake in Infosys to 36.66 per cent from 36.88 per cent during the quarter. The stock fell 12.85 per cent during this period in line with 12.7 per cent fall in Sensex.

In Wipro, which draws over 75 per cent revenues from its IT business, domestic institutions hiked stake to 4.16 per cent from 3.73 per cent during the quarter. This is the highest level of DII holding on the counter in at least 25 quarters. Shares of Wipro fell 18.4 per cent between June and September.

K Ramanathan of ING Investment Management felt some large-cap stocks may have offered value when stock prices fell during this past quarter, but right now they looked fairly valued.

Not all DIIs see value in large-cap IT stocks. “We are not bullish on the IT sector. We are not making fresh buys in this space, the reason being that two-thirds of the world’s GDP is under pressure. We do not foresee how this sector will post good growth. Long-term weakness for the IT sector is bound to be there,” said Saibal Ghosh, chief investment officer with Aegon Religare Life Insurance.

The case for HCL Technologies is similar, where DII holding was at a 15-quarter high of 6.71 per cent at the end of the September quarter, during which the stock fell over 17 per cent.

(With inputs from

Shruti Verma Khare)