Why Have Foreign Investors Become Buyers in the Indian Market?
Click to start listening
Synopsis
Foreign institutional investors (FIIs) are turning the tide in the Indian market, shifting from selling to buying amidst festive optimism. This change could signal a new era of investment enthusiasm in India as valuations align favorably. Discover how this shift impacts the market outlook and what it means for investors as the festive season unfolds.
Key Takeaways
- FIIs are reducing selling in the Indian market.
- Shift to buying observed amidst improving valuations.
- Strong earnings growth predicted due to fiscal reforms.
- Festive season driving sales in key sectors.
- Positive sentiment expected during Diwali trading.
Mumbai, Oct 19 (NationPress) Foreign institutional investors (FIIs) have significantly curtailed their selling activities in the Indian market and have even shifted to a buying stance on certain days, analysts reported on Sunday.
A noticeable shift in FII behavior has been observed recently. As of October 17, FII selling plummeted to just Rs 4,114 crore.
According to Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, the main factor behind this shift in FII strategy is the narrowing valuation gap between India and other markets. India's underperformance over the past year has created opportunities for enhanced performance moving forward.
The outlook for earnings growth, driven by fiscal and monetary reforms, has also improved. Recent data suggests a surge in sales of automobiles and consumer durables during the festive season, he noted.
As the valuation gap decreases and Indian earnings are projected to rise in FY27, it is anticipated that FIIs will continue to reduce their selling activities in the future. The higher valuations in India compared to cheaper valuations elsewhere have been the key factors influencing FII behavior.
A consistent trend in FII activity over the past two years has been a sustained investment in the primary market.
Analysts pointed out that the relatively lower valuations of IPOs and preferential allotments to institutions have made FII investments in the primary market notably lucrative. This trend is expected to persist.
The market is entering the new week with a positive outlook.
With cooling inflation, strong domestic macroeconomic fundamentals, and robust earnings momentum, the medium-term outlook appears favorable, according to Ajit Mishra, SVP of Research at Religare Broking Ltd. The upcoming truncated trading week is set to be eventful, with numerous significant triggers for investors on the horizon.
The one-hour Diwali special muhurat trading session on October 21, marking the start of Samvat 2082, is expected to be closely monitored for sentiment signals and festive enthusiasm, with strong retail and institutional participation anticipated.
Point of View
It is crucial to recognize the evolving dynamics of foreign investments in India. With FIIs showing renewed interest, this reflects a growing confidence in India's economic potential. The market's response to this shift, especially during the festive season, could pave the way for increased participation and optimism among investors nationwide.
NationPress
19/10/2025
Frequently Asked Questions
What has led to the shift in FII strategy?
The narrowing valuation gap between India and other markets, along with improved earnings growth prospects, has encouraged FIIs to change their strategy.
How has festive season impacted sales?
High-frequency data indicates brisk sales of automobiles and consumer durables during the festive season.
What is the outlook for future FII actions?
With improved earnings projections and a reduced valuation gap, FIIs are expected to slow down their selling in the future.
What is the significance of the upcoming Diwali trading session?
The Diwali muhurat trading session is anticipated to provide sentiment cues and attract strong retail and institutional participation.
Why is the primary market attractive to FIIs?
Lower IPO valuations and preferential allotment to institutions make investments in the primary market highly profitable for FIIs.
