The headline news that the Foreign Institutional Investors (FIIs) have turned from net sellers to net buyers in October marks a significant shift in market sentiment. With an estimated ₹14,610 crore invested in the month after three consecutive months of withdrawal, the move has captured investor attention. This article explores what prompted the reversal, why the figure matters, and what it could signal for Indian equities going forward.
What’s the update?
- After selling for three months (July-September) in a row, FIIs have returned to net buying in October.
- According to one source, FIIs made net infusions of around ₹14,610 crore into Indian equities in October.
- Other reports show somewhat lower amounts: for instance, data indicates FIIs pumped about ₹6,480 crore into equities during October
- This divergence in numbers highlights that the full month’s data may still be under compilation and different sources are using slightly different cut-offs.
Why did FIIs start investing again?
1. Valuation improvement
With three months of outflows behind us, valuations of many Indian stocks may have become more attractive in comparison to global peers, prompting foreign funds to start deploying fresh capital.
2. Stronger earnings and macro context
Better-than-expected corporate Q2 (or Q1) results and stable domestic demand appear to have improved investor confidence.
3. Expectation of global liquidity easing
There are signs that global monetary policy is turning less aggressive, which tends to favour emerging markets like India.
4. Reversal of sentiment after prolonged selling
Three months of sustained outflows weighed on sentiment; the reverse move may reflect a shift in mindset among FIIs that India may be relatively undervalued or “due” for inflows. mint
Why the “₹14,610 crore” figure is important
- If accurate, it signals a meaningful reversal of the earlier selling trend, which is positive from a market-dynamics standpoint.
- It suggests foreign funds are again willing to take risk in Indian equities, which can help support valuations and market breadth.
- The size matters: large scale foreign buying adds liquidity and potentially drives market momentum, especially in large-cap stocks.
- It provides a psychological boost to domestic investors and can influence domestic institutional flows and retail sentiment.
Risks & caveats
- The number is still provisional: different sources show varying estimates (₹6,480 crore vs ₹14,610 crore). Full month and exchange-verified data may modify the figure.
- One month of inflows doesn’t guarantee a sustained trend; the earlier three months of outflows underscore how fragile foreign sentiment can be.
- Global macro risks remain: U.S. interest rate decisions, dollar strength, trade tensions, emerging-market risk-off can all reverse flows again.
- Domestic issues too: valuation stretch, corporate earnings disappointments or policy uncertainty could derail the positive momentum.
- The composition of flows matters: Are those flows into broad market, large-caps, a few stocks? Concentration risks could limit breadth of market impact.
What to watch next
- October full-month data: Check end-of-month published numbers for FIIs and see if ₹14,610 crore holds or is revised.
- November flows: Whether the inflow momentum is sustained or reverts back to outflows.
- Corporate earnings: Q2/Q3 updates will matter in sustaining foreign interest.
- Global cues: U.S. Fed policy, dollar movement, global risk appetite.
- Market reaction: How Indian indices respond; whether this foreign buying translates to domestic market strength beyond large-caps.
Outlook
The positive foreign inflow in October – potentially around ₹14,610 crore – is a welcome development for Indian markets, showing that foreign investors are willing to redeploy into Indian equities after a period of caution. If sustained, this could contribute to improved market sentiment, liquidity, and valuation support. However, it remains early days and much will depend on whether the trend holds, earnings stay strong, and external risks remain contained.
