FIIs remain net sellers for sixth week, offload ₹11,490 crore; DIIs buy ₹16,398 crore

Indian equity markets ended lower for the seventh consecutive week as rising Brent crude oil prices, sustained selling by foreign investors and a spike in US bond yields left investors jittery. The BSE Sensex declined 0.54% to close at 73,895.74, while the Nifty fell 0.88% to settle at 23,140.50.

The market witnessed broad-based selling, with the Bank Nifty declining 1.4%, while the Nifty Midcap and Smallcap indices fell 2.1% and 0.9%, respectively.

Foreign institutional investors (FIIs) remained heavy sellers in Indian equities during the week ended September 25, while sustained domestic institutional buying provided a cushion to the market.

FIIs sold a net ₹11,490 crore in equities during the week, registering their sixth consecutive week of net selling, according to data shared by Bajaj Broking. On the other hand, domestic institutional investors (DIIs) extended their buying streak, recording net purchases of ₹16,398 crore during the week.

The divergence between foreign and domestic institutional flows has widened considerably in September. FIIs have sold a net ₹18,531 crore so far this month, while DIIs have bought ₹52,617 crore, highlighting the growing role of domestic institutions in absorbing foreign selling pressure.

Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking, said FIIs remained net sellers for the sixth straight week, while DIIs continued to buy, cushioning the decline.

“Going ahead, if FII selling sustained while global headwinds are likely to keep markets volatile, though steady domestic institutional buying should continue to limit the downside,” Mukherjee said.

Global cues remain a headwind

Rising US Treasury yields and higher crude oil prices have added to the pressure on foreign flows. Ponmudi R, CEO of Enrich Money, said the US 10-year Treasury yield moved above 5.10% during the week, tightening global financial conditions and reducing the relative attractiveness of emerging-market assets.

“The combination of higher oil prices, elevated yields and geopolitical uncertainty contributed to the sharp sell-off seen during the middle of the week,” he said.

Ponmudi added that the acceleration in FII selling could make a sustained recovery in domestic equities difficult unless global risk conditions and foreign flows improve.

Primary market draws foreign capital

However, exchange-level FII selling does not tell the entire story, according to Dheeraj Gaur, Chief Investment Strategy Officer at Choice Wealth.

While provisional NSE data showed ₹11,490 crore of net FPI selling in the secondary market during September 21-25, settled depository data from NSDL and CDSL showed a net ₹3,843 crore inflow into equities during the week.

Gaur attributed the divergence largely to continued foreign participation in the primary market. The primary market recorded ₹5,515 crore of FPI inflows on September 24, helping offset part of the selling in secondary-market equities.

Bond markets show resilience

Foreign flows into debt instruments remained relatively resilient during the week, with settled FPI data showing a net inflow of ₹885 crore, Choice Wealth's Gaur said.

However, the composition of these flows suggests that foreign investors remain selective. Government securities under the Fully Accessible Route (FAR) recorded around ₹2,912 crore of net buying, more than offsetting approximately ₹822 crore of selling under the general debt route and around ₹1,205 crore of selling under the Voluntary Retention Route (VRR).

“This suggests that foreign demand has not disappeared from Indian fixed income, but is becoming increasingly sensitive to relative yield, currency risk and the global rate environment,” Gaur said.

Mukherjee of Bajaj Broking said continued FII selling amid global headwinds could keep markets volatile, while sustained domestic institutional buying could help limit the downside.

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