Foreign investors sold Rs 45,162 crore of Indian equities in October, but the selling pace slowed late in the month. Domestic institutions stepped in and bought a net Rs 62,220 crore, providing stability. Strong September-quarter earnings also helped, as profits rose 34% year-on-year, keeping the market in a better position.
Indian equities enter November in a better position than October's headline foreign-outflow numbers suggest. Foreign investors continued to sell, but the pace slowed late in the month, while domestic institutions absorbed much of the supply and corporate earnings delivered a stronger-than-expected start to the season. Foreign portfolio investors sold about Rs 45,162 crore of Indian equities in October, ending the month as net sellers on 14 out of 20 sessions. Yet, they turned net buyers on six days, including Rs 3,598.54 crore on October 30, signalling that the intensity of the sell-off was easing.
Domestic institutional investors more than offset the foreign selling. They bought a net Rs 62,220 crore in October (roughly 138% of the FII outflow) and have purchased about Rs 7 lakh crore so far in 2026, against FII net sales of about Rs 4.5 lakh crore. That shift has changed the market's ownership structure. Domestic institutions now hold about 19% of the market, compared with roughly 14% for foreign investors, giving Indian equities a more stable domestic base even during periods of overseas selling. Earnings provide a stronger backdrop The earnings season has reinforced that support. Among 134 companies in Nomura's BSE 200 coverage that had reported September-quarter results, normalised profit after tax rose 34% year-on-year, beating consensus estimates by 18%.
Excluding oil and gas, profit growth was 29%, still 5% ahead of expectations. Power, coal, metals, infrastructure and pharmaceuticals led the upside, while staples, autos and chemicals lagged. Nomura said demand has held up better than anticipated after last year's policy support, although it cautioned that the aggregate print is strong even as the distribution of beats and misses remains broadly even. Valuations also look less demanding. Nomura noted that most sectors now trade below their post-pandemic averages, and argued that low starting expectations, softer global yields and the possibility of a long-term capital gains tax cut for foreign investors could help portfolio flows revive.
It expects the Nifty to move beyond its March 2027 target of 24,000. The AI-rotation caveat Not every strategist sees India as an automatic beneficiary of money rotating out of AI-heavy markets. Bernstein argues that India is not a natural "AI hedge": capital exiting AI stocks or East Asian markets such as Korea and Taiwan will not necessarily move into Indian equities, since investors operate under different mandates and risk preferences. Instead, Bernstein's modestly positive outlook rests on mean reversion and non-AI catalysts, including the US midterms, a possible easing of Middle East tensions that could lower crude prices, and potential tax changes.
In other words, India still needs to compete on earnings, valuation and risk; not simply benefit from a global rotation. Oil and inflation remain the tests The biggest near-term risks are crude oil and inflation. JM Financial's research indicates that foreign flows have historically been more sensitive to oil-price thresholds and lagged valuations than to GDP growth. Brent has corrected from its recent peak but remains elevated, keeping imported-inflation and margin risks alive. Morgan Stanley expects headline CPI inflation, which accelerated to 5.5% year-on-year in September, to climb further as food inflation rises.
It projects retail inflation could peak at 6.3% in the December quarter and expects the Reserve Bank of India to raise the repo rate to 6.25% by April 2027.bfsi.economictimes. Higher rates and persistent inflation could limit valuation expansion, even if foreign selling continues to moderate. What to watch next India's market setup has improved: domestic institutions are providing liquidity, earnings are beating expectations, valuations are less stretched, and FII selling pressure is easing. But the next leg of the rally is likely to depend less on the AI-rotation narrative and more on whether oil cooperates, inflation remains contained, and the earnings recovery broadens beyond a few cyclical sectors.
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