FIIs dump Indian stocks for eight straight weeks: Is a reversal on the cards or more pain ahead?

Foreign institutional investors (FIIs) extended their selling streak in Indian equities to eight consecutive weeks, offloading shares worth Rs 30,294 crore in the last trading week, even as domestic institutional investors (DIIs) stepped up purchases to absorb the outflows.While the Nifty 50 snapped its 8-week losing streak to close marginally higher, elevated crude oil prices, a weakening rupee and volatile global bond yields continued to weigh on sentiment.DIIs bought equities worth Rs 30,313 crore during the week, absorbing the FII selling and helping the benchmark recover from its weekly low. The Nifty closed at 22,520.45 on Friday, gaining 0.4% over the week, after touching a fresh 52-week low of 22,180 on Thursday.It had climbed to a weekly high of 22,776 on Tuesday before a sharp decline erased its gains.The divergence between foreign and domestic investor flows has become a defining feature of the market’s recent performance, raising questions about whether sustained domestic buying can cushion further foreign outflows or whether global headwinds will prolong the pressure on equities.FII selling versus DII buying: What do the flows show?The selling pressure has continued into October. FIIs have sold a net Rs 39,779 crore so far this month, while DIIs have purchased equities worth Rs 40,355 crore. Despite the domestic buying, the Nifty remained 0.44% below its September-end close of 22,620.45.“Over the past eight weeks, FIIs were net sellers throughout while DIIs remained consistent net buyers, limiting the Nifty’s 7.57% slide from 24,366.00 to 22,520.45,” said Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking.Mukherjee said persistent foreign selling and global headwinds were likely to keep markets volatile, although domestic institutional buying could continue to limit the downside.“Going ahead, relentless FII selling and global headwinds are likely to keep markets volatile, though record domestic institutional buying should continue to limit the downside,” he said.Ravi Singh, Chief Research Officer at Master Capital Services, also highlighted the tug-of-war between foreign fund outflows and domestic buying.“The market tone remained watchful throughout, driven by a persistent tug-of-war between relentless foreign fund outflows and strong domestic counter-buying,” Singh said.What could trigger a reversal?Global financial conditions and currency movements remain important factors shaping foreign investor sentiment towards Indian equities. During the week, Brent crude remained above $100 a barrel, US bond yields moved higher before easing, and continued weakness in the rupee added to market pressure. The Reserve Bank of India also raised the repo rate by 25 basis points and shifted its policy stance to calibrated tightening.Singh said sentiment received some relief as the US 10-year Treasury yield eased from multi-month highs near 5.36% to 5.24%.“This mitigation in global yields eased financial conditions and stemmed immediate capital flight from emerging markets,” he said.He also pointed to a shift in global risk appetite, with the hyper-growth narrative around artificial intelligence showing signs of slowing. According to Singh, moderation in speculative AI positioning encouraged international capital to reallocate towards fundamental value plays and broader market exposures.Mukherjee said investors would closely monitor US and Indian inflation data, US bond yields, Brent crude prices and developments in US-Iran geopolitical tensions in the coming week.The RBI’s policy shift also remained a factor for investors to assess. Singh said market participants interpreted the central bank’s monetary stance as a measure to anchor inflation and defend the rupee against foreign capital outflows.ALSO READ: Exclusive | Akash, Isha Ambani take Rs 30,000 crore Jio IPO pitch global; marquee investors seek bigger stakesNifty outlook: Can the recovery sustain?The Nifty’s weekly gain interrupted its prolonged decline, but the focus remains on whether the rebound can extend beyond a short-term recovery.Singh said the index had rebounded 0.44% during the week after eight consecutive weeks of losses, finding support near its trendline support and the 100-week exponential moving average (EMA).“This recovery from oversold territory offers some relief and raises the possibility of a short-term technical rebound,” Singh said.He identified the 22,150-22,200 zone as a key level to watch. If the index holds above this range, it could recover towards 22,750, followed by 23,000, near the 21-day EMA.“However, the broader trend remains weak, and the rebound should be viewed cautiously until the index reclaims key resistance levels. Sustained buying momentum will be crucial to confirm a stronger recovery,” Singh said.Sectorally, IT, banking and financial services led the weekly recovery, while energy remained muted amid volatile crude oil prices. Singh said strong domestic institutional inflows continued to act as…