After withdrawing nearly $21 billion from Indian equities over recent months, foreign institutional investors (FIIs) are showing early signs of selective buying. Activity has been visible in large-cap banking, capital goods and defence stocks.
However, sustained foreign inflows remain dependent on global interest rate trends. Strong US economic data has pushed Treasury yields higher, reducing the relative appeal of emerging market assets. Any delay in US Federal Reserve rate cuts could moderate the pace of FII participation in the near term.
Domestic institutional investors (DIIs) continue to absorb market volatility, providing stability during periods of foreign outflows.
