FIIs pump Rs 45,960 crore into Indian stocks in a week; is the tide finally turning for Dalal Street?

Foreign institutional investors (FIIs) have made a strong comeback on Dalal Street, pumping a net Rs 45,960 crore into Indian equities in a single week, raising hopes that the prolonged spell of foreign selling may finally be over.

The aggressive buying more than offset the Rs 45,162 crore withdrawn by overseas investors in October, marking a sharp reversal in institutional flows. It also coincided with one of the strongest weekly rallies in benchmark indices.

The latest data points to a shift in market leadership. FIIs were net buyers in all five trading sessions during the week, extending their buying streak to a second consecutive week after a 10-week selling spell. Domestic institutional investors (DIIs), meanwhile, turned net sellers for the first time in 12 weeks, offloading shares worth Rs 24,197 crore as they booked profits following the sharp market recovery.

FIIs go on a buying blitz, post biggest single-day inflow in over a year

The intensity of foreign buying was particularly evident towards the end of the week, with overseas investors pumping a net Rs 28,724 crore into Indian equities across Thursday and Friday. DIIs, in contrast, sold shares worth Rs 16,413 crore during the same period.

On Friday, November 6, FIIs invested a net Rs 13,750 crore in domestic equities, extending their buying streak to 14 consecutive trading sessions. This followed a massive purchase of Rs 14,975 crore on Thursday, November 5, marking the biggest single-day FII investment in Indian equities in more than a year.

With Friday’s purchase, cumulative foreign investments since October 16 reached Rs 53,154 crore, according to exchange data.

The turnaround is significant given the scale of selling in October, when foreign investors withdrew Rs 45,162 crore from Indian equities. The latest weekly inflow has more than made up for those outflows, suggesting renewed interest among overseas investors in the domestic market.The domestic institutional picture, however, was markedly different. DIIs sold equities worth a net Rs 5,969 crore on Friday, following net sales of Rs 10,445 crore in the previous session. Their combined selling over the two sessions stood at Rs 16,414 crore.

For the week as a whole, DII selling reached Rs 24,197 crore, snapping an 11-week buying streak.

Why are FIIs returning to Dalal Street?

The renewed interest in Indian equities comes amid a shift in the global investment landscape. Improving domestic earnings prospects, relatively attractive valuations and easing geopolitical concerns have supported sentiment towards Indian stocks.

“The sudden change in FPI stance was triggered by the AI sell-off in the US and other AI markets like South Korea, Taiwan and Japan. This sell-off, in turn, was triggered by fears surrounding data centre spending in the US. The Democrats, who won both the chambers of the Congress, are opposed to indiscriminate data centre spending. They will demand guard rails for AI,” said V K Vijayakumar, Chief Investment Strategist at Geojit Investments.

He believes the correction in AI-related stocks has made India, widely regarded as a non-AI trade, more attractive to foreign portfolio investors (FPIs).

“Furthermore, the impressive earnings growth in India and the attractive large-cap valuations made India a favoured investment destination,” he added.

Global brokerage Nomura also believes Indian equities could become more attractive to foreign investors as earnings improve and valuations remain below their post-pandemic averages.

The brokerage has pointed to the correction in artificial intelligence-related stocks in international markets as a potential trigger for capital to move towards other markets, including India.

Expectations of a possible reduction in long-term capital gains tax for foreign investors have added to the optimism. However, such a change remains uncertain, with no policy decision confirmed.

Easing geopolitical tensions, lower bond yields and a sharp decline in crude oil prices have also improved the investment environment for Indian equities. Weakness in global AI and semiconductor stocks has further contributed to positive sentiment towards the domestic market.

Together, these factors have created a more favourable backdrop for foreign investors to return. Whether the inflows sustain, however, will depend on how long these supportive conditions last.

Strongest weekly rally puts foreign buying in focus

The return of foreign capital coincided with a sharp rally in domestic benchmark indices, with both the Nifty and Sensex gaining more than 8.5% during the week.

The Nifty advanced in all five trading sessions, surging 1,977 points, or 8.57%, to close at 25,030 on Friday, November 6. The Sensex climbed 6,568 points, or 8.82%, to settle at 81,028, marking one of the strongest weekly performances for the domestic market.

The rally was supported by renewed FII inflows, strong domestic earnings, easing geopolitical tensions, lower bond yields and declining crude oil prices. Weakness in global AI and semiconductor stocks also contributed to the improvement in sentiment towards Indian equities.

The sharp recovery has improved the near-term market structure. However, after such a steep rally, investors will be watching whether foreign buying continues at the same pace or whether the market enters a consolidation phase.

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Sustainability of foreign inflows remains the biggest question

While the latest FII numbers have strengthened the case for a foreign fund comeback, market participants remain cautious about reading too much into a single week of aggressive buying.

Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking, said the sustainability of foreign inflows would be the key variable in the coming weeks, particularly as domestic institutions have stepped up profit-booking following the sharp rally.

He added that market participants would closely monitor Brent crude prices and developments surrounding US-Iran tensions.

The Q2FY27 earnings season will also remain in focus, with corporate results and management commentary expected to offer insights into earnings momentum and the broader business outlook.

Crude oil prices will be particularly important, given the support that lower prices have provided to the recent market recovery. Any renewed geopolitical uncertainty could alter global risk sentiment and influence foreign investment decisions.

Will the FII buying spree continue or give way to profit-booking?

Hariselvan Radhakrishnan, Founder and CEO of HST Wealth, said the coming week would be a crucial test of whether the recent rally signals a sustained reallocation of foreign capital towards Indian equities or is merely a sharp tactical rebound driven by softer crude prices and short-covering.

According to him, a continuation of FII inflows, stability in oil prices and a decisive breakout by the Bank Nifty above the 60,000 mark could provide further impetus to the market rally.

However, risks remain. Persistent US inflationary pressures, a resurgence of geopolitical tensions or a further narrowing of domestic market breadth could leave equities vulnerable to profit-booking after the sharp recovery.

From a technical perspective, Radhakrishnan noted that the Nifty has reclaimed all its major moving averages, indicating an improvement in the broader market structure. However, the sharp pace of the recovery raises the probability of near-term consolidation.

A sustained move above 25,150 would confirm further upward momentum, while the 24,950-24,900 range remains the immediate support zone. A failure to hold this support could extend consolidation towards the breakout region.

Disclosure: This article has been written by Kumar Gaurav, who is not a Sebi-registered Research Analyst or an Investment Adviser. Gaurav and their ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever appelicable, are those of the respective Sebi-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here