Indian Stock Market Consolidates As Domestic Investors Absorb Heavy FII Selling

The Indian stock market remained in consolidation mode this week, grappling with selling pressure from foreign institutional investors (FIIs) amid a global shift sparked by Donald Trump’s return to power in the US election and a second consecutive rate cut by the US Federal Reserve. This correction has particularly impacted high-valuation sectors, according to market experts.

Despite significant FII outflows, the Indian market has shown resilience, buoyed by sustained buying from domestic institutional investors (DIIs) and individual high-net-worth investors (HNIs). DIIs have been absorbing the heavy selling, infusing over Rs 1 lakh crore into Indian equities in October, a stabilizing factor that has kept the Indian market on firmer ground than many of its global counterparts.

Encouraging signs have also emerged from India’s domestic economy. A recent uptick in manufacturing activity has boosted investor sentiment, and upcoming government spending in the latter half of FY25 is expected to bolster corporate earnings. Additionally, the festive season in the third quarter is likely to revive consumption, lending further support to the market.

Also Read: US Fed’s Rate Cut Sparks Optimism For Emerging Markets; Analysts Say India Could Benefit

On the global front, Trump’s re-election has alleviated some political uncertainty, while the Federal Reserve’s recent 25-basis-point rate cut offers further economic support.

However, the effects of FII selling are on Indian stock market still palpable. In October, FIIs sold equities worth Rs 113,858 crore, and November has seen a further outflow of Rs 19,849 crore. Market analysts expect this trend to persist until macroeconomic data signal a potential reversal.

On Friday, the market closed with minor losses as Sensex dipped 55.47 points, or 0.07%, to 79,486.32, and Nifty slipped 51.15 points, or 0.21%, to 24,148.20.

Deepak Jasani, Head of Retail Research at HDFC Securities, noted, “The short-term trend for Nifty remains choppy, with consolidation likely to continue in the near term with a weak bias.” He pointed to support at the 23,800 level and immediate resistance around 24,537, emphasizing the cautious sentiment as investors navigate the ongoing volatility.