FIIs Surge to Record Buying, US Rate Cut Hopes and Earnings Optimism Boost Indian Market Sentiment

Foreign Institutional Investors (FIIs) were major net buyers on October 28, purchasing stocks worth Rs 10,339.80 crore, the highest single-day inflow since June 26. This strong buying activity has put October's total FII inflows on track to end at a three-month high, with net purchases of Rs 10,040 crore so far this month, surpassing June's total. Market veteran Ajay Bagga attributes this buying to a mix of large block trades, cautious observation post-expiry day similar to June's trends, and an improved FII long-short ratio from 8:92 to 20:80 over the October series. Investors are now closely watching if this trend will sustain.

Key catalysts influencing FII sentiment include hopes for a US Federal Reserve rate cut. The ongoing two-day FOMC meeting is expected to result in a 25 basis points (bps) rate reduction, partly due to concerns about the US labor market. Deven Choksey suggests that a Fed rate cut could weaken the US Dollar, potentially redirecting capital into emerging market equities. Dr. VK Vijayakumar notes that the Fed's commentary on quantitative tightening may be more significant than the rate decision itself. Despite the US Dollar's recent strength, the Indian Rupee has also shown some gains.

Furthermore, corporate earnings are showing signs of recovery. Many market participants believe that earnings have hit a low point in the September quarter. With results largely in line with estimates and management anticipating a second-half improvement, earnings optimism is also contributing to positive market sentiment.

Impact This confluence of strong foreign investment, potential global monetary easing, and domestic earnings recovery presents a positive outlook for the Indian stock market. It suggests increased capital inflow and improved investor confidence, which could drive market gains. Rating: 8/10

Difficult Terms FIIs (Foreign Institutional Investors): Overseas entities like foreign banks, mutual funds, and investment firms that invest in the securities of another country. FOMC (Federal Open Market Committee): The monetary policymaking body of the Federal Reserve System, responsible for U.S. open market operations. Basis Points (bps): A unit of measure used in finance to describe small changes in interest rates or other percentages. 100 basis points equal 1 percent. Emerging Markets (EM): Countries with developing economies, often characterized by rapid growth but also higher risk compared to developed economies. USD Index (Dollar Index): An index measuring the value of the United States dollar against a basket of six major world currencies. FPIs (Foreign Portfolio Investors): Similar to FIIs, this term refers to overseas investors who invest in domestic securities. Quantitative Tightening (QT): A contractionary monetary policy where a central bank reduces its balance sheet by selling assets or not reinvesting principal payments from maturing assets. Expiry Day: The last day of a futures or options contract's trading period.