• Foreign institutional investors (FIIs) have transitioned from sellers to buyers, investing Rs 24,453 crore in December, boosting the Indian economy.
• This shift in strategy has significantly altered market sentiments, particularly in large-cap banking stocks.
• India's forex reserves have increased by $1.51 billion for the first time in eight weeks, reaching $658.091 billion.
• The recent change in FII strategy reflects the resilience of the Indian economy amidst geopolitical conditions and boosts market sentiment.

In a significant shift of strategy, foreign institutional investors (FIIs) have transitioned from sellers to buyers, marking an end to the relentless FII selling that has been a characteristic of the Indian economy in recent times. This change comes despite the ongoing geopolitical conditions, and it is a testament to the resilience of the Indian economy, as observed by market watchers. Data from the National Securities Depository Limited (NSDL) reveals that FIIs have invested Rs 24,453 crore in December (up to the 6th). This investment includes Rs 17,921 crore in equity through exchanges and the remaining through the primary market.

FIIs Alter Market Sentiments

This shift in strategy, which occurred in early December, is a complete reversal of the sustained selling strategy that FIIs had been following for the past two months. This change has significantly altered market sentiments, according to market experts. In October, the total FII selling through exchanges amounted to Rs 113,858 crore. However, this figure declined to Rs 39,315 crore in November. Siddhartha Khemka of Motilal Oswal Financial Services Ltd noted that FIIs have started December on a positive note, providing a significant boost to market sentiment.

Khemka further stated, Next week, we expect the Nifty to maintain its gradual upmove, driven by potential increase in liquidity post RBI 's CRR cut, positive news flows around government policies and return of FII inflows. This change in FII strategy is being reflected in stock price movements, particularly in large-cap banking stocks, where FIIs have been sellers.

Market Experts Predict Growth

Market experts believe that this segment has further room to grow since it is fairly valued and is growing at a reasonable pace. The slow return of FII is a welcome relief after the relentless selling pressure witnessed in October and November. Despite heavy FII selling, domestic institutional investors (DIIs) inflows have kept the market afloat in the last two months.

In a related development, India's forex reserves have increased by a modest $1.51 billion for the first time in eight weeks, reaching $658.091 billion for the week ending November 29. For the same week, foreign currency assets, a major component of the reserves, increased by $2.061 billion to $568.852 billion, according to the weekly RBI data.

This shift in FII strategy is reminiscent of similar historical events where market dynamics have been significantly influenced by FII activities. For instance, during the 2008 financial crisis, FIIs pulled out massive funds from emerging markets, including India, causing a sharp fall in stock prices. However, the situation improved in the following years as FIIs turned net buyers, leading to a recovery in the markets.