FII selloff has intensified in October, with foreign investors net selling Indian equities worth Rs 45,125 crore in just six sessions in October so far, nearly the same as the total Rs 45,536 crore outflows recorded in the entire month of September. Analysts have listed factors that could change the trend and ease pressure on the market.
The Indian stock market snapped a record eight-week-long losing streak last week, ending with gains despite strong upswings and downswings. Yet, FIIs remained bearish and continued selling Indian equities in every session so far in October. The foreign investors have remained net sellers of Indian equities for 11 consecutive sessions since mid-September.
What's behind the massive FII outflows?
The sharp FII selloff came as bond yields soared to multi-year highs, making the risk-free returns from the debt market more lucrative than equities. The 10-year US Treasury yield recorded its biggest quarterly increase of the 21st century in the three months ended September, Reuters reported. The yield on 10-year US Treasuries climbed above 5.3%, surpassing its 2007 peak and hitting its highest since early 2002. The 30-year yield has touched 5.6%, also not seen since 2002.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that the rapid acceleration in FII outflows in October so far has taken the total FPI equity selling in 2026 to a whopping Rs 3,60,952 crore. “This massive FPI selling is the primary reason why the Indian market is underperforming this year with negative 13.87% Nifty returns so far in 2026,” he said.
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When can the trend reverse?
From the FPI perspective, the rationale behind the massive outflows is the risk-free return from the 10-year US bonds being above 5.2%, according to the analyst. “So long as the US bond yields remain elevated, FPIs will continue to sell. The scenario will change when the valuations become attractive, and the risk-reward ratio turns favourable for investment,” Vijayakumar explained.
Over the last two months, the market has been steadily trending down. Elevated crude prices and high US bond yields are the two headwinds for the market now, he added, warning that so long as these headwinds remain strong, the market will remain under pressure.
Going ahead, investors will closely track US and Indian inflation data, US bond yields, Brent crude prices and developments in US-Iran geopolitical tensions in the coming week, according to Pabitro Mukherjee, Deputy Vice President of Research at Bajaj Broking.
Also read | FIIs dump Indian stocks for eight straight weeks: Is a reversal on the cards or more pain ahead?
Going forward, the 22,350–22,330 zone could act as immediate support for Nifty, according to Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities. He noted that a decisive move below this zone could trigger renewed selling pressure towards 22,200.
On the upside, the 22,660–22,680 zone, coinciding with the 10-day EMA, could act as an immediate hurdle, according to the analyst, who feels that a sustained move above this zone could trigger short covering and extend the pullback towards 22,820. Despite the recent recovery, confirmation through sustained buying remains necessary, he warned.
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Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.
