Indian equity markets have extended their losing streak to seven weeks, with foreign investors withdrawing ₹11,490 crore due to rising US bond yields and higher oil prices. Domestic institutional investors have countered this trend by injecting ₹16,398 crore to support the market. Investors are closely watching if this domestic support can continue to absorb the selling pressure.
Indian stock markets have continued their decline for the seventh consecutive week, as global economic pressures weigh on investor sentiment. The BSE Sensex and Nifty 50 both closed in the red, with the Bank Nifty and midcap indices seeing steeper declines, reflecting broader weakness across the exchange.
The current selling pressure is primarily driven by Foreign Institutional Investors (FIIs), who have been net sellers in the secondary market for six straight weeks. This week alone, FIIs pulled out ₹11,490 crore. This shift is largely attributed to a spike in US 10-year Treasury yields, which have crossed the 5.10% mark. When US borrowing costs rise, global capital tends to move toward safer, higher-yielding US assets, leading to reduced appetite for emerging market equities like those in India. Furthermore, surging Brent crude oil prices have added to the anxiety, as they threaten to increase the country's import costs and inflationary pressures.
Despite the foreign exodus, the Indian market has seen significant support from Domestic Institutional Investors (DIIs). During the same period, DIIs invested ₹16,398 crore into the equity market. This domestic buying has been a key stabilizer, with DIIs putting over ₹52,617 crore into the market throughout September. This consistent domestic liquidity has prevented a sharper correction, highlighting the growing influence of local institutional capital in managing volatility.
Interestingly, the flight of capital is not uniform across all asset classes. While equities are facing outflows, debt markets remain resilient. Foreign investors recorded a net inflow of ₹885 crore into Indian debt instruments, with a strong preference for government-backed securities under the Fully Accessible Route (FAR). This suggests that while global investors are becoming cautious about the volatility of Indian stocks, they remain selective in their fixed-income allocations, prioritizing assets with government backing over corporate or voluntary retention route papers.
Looking ahead, the market's stability will likely hinge on whether domestic buying can continue to offset the selling pressure from foreign entities. Investors will need to track the movement of US Treasury yields, the stability of global crude oil prices, and the flow of funds into primary market offerings, which have acted as a minor offset to secondary market selling.