Foreign institutional investors (FIIs) ended their 40-session selling streak on Monday, turning net buyers as Indian equity markets saw a sharp rally. This uptrend followed the Maharashtra election results and the implementation of the MSCI rebalancing.
According to provisional data from the NSE, FIIs purchased shares worth ₹9,948 crore, while domestic institutional investors (DIIs) sold shares amounting to ₹6,908 crore, turning net sellers after 13 consecutive sessions of buying.
“FIIs turned net buyers after a 40-session streak of net selling, as markets opened higher with renewed optimism following a strong election outcome over the weekend. The BJP's historic victory in Maharashtra boosted sentiment. NIFTY saw a bounce on Friday after an 8-week sell-off, trading at 19.5 times its one-year forward earnings,” said Vikas Jain, Head of Research at Reliance Securities.
Jain noted that HDFC Bank and five other stocks — Alkem Laboratories, BSE, Kalyan Jewellers, Oberoi Realty, and Voltas — are expected to see inflows of up to $2 billion due to MSCI’s rebalancing, which took effect on Monday. This rebalancing led to significant buying activity in the last hour of trade. HDFC Bank, the largest beneficiary, saw its shares rise 2.3 percent to close at ₹1,785.6.
The MSCI adjustment, announced earlier this year, was implemented in two stages and is anticipated to boost liquidity in select stocks.
The sustained FII selling in the past two months had weighed heavily on India’s benchmark indices, with the Sensex and Nifty 50 declining by 11–12 percent in less than two months, erasing gains made earlier in the year. However, the markets have rebounded over the last two sessions, bolstered by the election outcome.
During Monday’s session, FIIs purchased shares worth ₹85,252 crore and sold equities valued at ₹75,305 crore. DIIs, meanwhile, bought ₹17,625 crore worth of shares while selling stocks worth ₹24,533 crore.
October witnessed one of the heaviest outflows by FIIs, with equities worth ₹1.14 lakh crore sold through exchanges. In November, FIIs sold an additional ₹42,000 crore as of November 22.
Few factors that led to this massive selling by FIIs are -- ‘Sell India, Buy China’ trade, the concerns surrounding FY25 earnings and the ‘Trump trade.’
“Of the three, the ‘Sell India, Buy China’ trade is over. The Trump trade also appears to be on its last leg since valuations have reached high levels in the US. Therefore, the FII selling in India is likely to taper off soon. Also valuations of largecaps in India have come down from the elevated levels. FIIs have been buying IT stocks and this has been imparting resilience to IT stocks,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Jain of Reliance Securities remain positive on the markets with a medium term perspective and will await the domestic credit policy outcome next month.