Foreign institutional investors (FIIs) have staged a significant return to the Indian stock market, executing their largest single-day purchase in over a year. According to provisional exchange data, overseas investors made a net purchase of Rs 14,975 crore on Thursday. This massive influx of capital signals a major turnaround in investor sentiment, marking a departure from months of relentless selling that had previously pushed foreign ownership of Indian equities to historic lows.
This substantial buying spree stands in direct contrast to the actions of domestic institutional investors (DIIs), who acted as net sellers during the same session, offloading shares worth Rs 10,445 crore. For much of the earlier part of the year, domestic institutions had provided the primary support for the market, effectively absorbing the pressure exerted by the prolonged foreign selloff.
The recent surge is part of a broader trend that has accelerated since mid-October. Data indicates that FIIs have invested a net total of Rs 39,404 crore over 13 trading sessions starting from October 16. In the last four trading sessions alone, foreign purchases have amounted to Rs 20,834 crore. This recovery comes after a challenging period where global investors pulled billions of dollars out of India due to soaring crude oil prices, geopolitical tensions in West Asia, a depreciating rupee, and apprehension regarding corporate earnings.
The impact of this renewed interest was clearly visible in the performance of the benchmark indices. On Thursday, the Nifty 50 climbed 2.4% to close at 24,536.60, effectively reclaiming the 24,000-point mark and reaching its highest closing level since August. Simultaneously, the Sensex jumped 2,008.61 points, recording a 2.6% gain to settle at 79,310.01. This performance represents the strongest single-day rally for Indian shares in seven months.
The market rally was broad-based, with the banking and automobile sectors leading the charge. The Nifty Bank index surged by 3.3%, while the Nifty Auto index recorded a 4.1% climb. Analysts suggest that these sectors were bolstered by robust quarterly financial results and expectations that lower energy costs will provide relief to profit margins. The Nifty itself has gained over 8% in the span of six consecutive trading sessions.
A critical catalyst for this recovery is the recent decline in global crude oil prices. As India relies heavily on imports to meet its energy needs, a drop in crude prices eases concerns regarding the national import bill, inflation, and the stability of the rupee. Additionally, reports suggest that a reduction in tensions within West Asia and a softening of the US dollar have improved the attractiveness of emerging-market equities. Global brokerage Nomura noted that as corporate earnings improve and valuations remain below post-pandemic averages, India may continue to appear more appealing to international capital.
Looking ahead, market participants are also weighing the potential impact of corporate performance. With several large-cap companies reporting strong September-quarter results, investors are reassessing market valuations following the recent correction. While some investors speculate on potential policy changes, such as adjustments to long-term capital gains tax for foreign participants, the immediate market momentum remains closely tied to global energy trends, sustained earnings growth, and a shifting flow of capital from other international markets.
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