Foreign institutional investors (FIIs) have substantially reduced their selling in the Indian market and have even turned buyers in some days, analysts said on Sunday. A marginal change in FII activity is discernible in recent days. Till October 17, FII selling has drastically reduced to only Rs 4,114 crore.

“The principal reason for this change in FII strategy is the reduced valuation differential between India and other markets. India’s underperformance during the last one year has opened up prospects for better performance, going forward,” said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.

Also, the prospects of earnings growth in response to fiscal and monetary reforms have improved. High frequency data indicate brisk sales of automobiles and consumer durables during the festive season, he mentioned. With the valuation differential coming down and Indian earnings likely to improve in FY27, FIIs are likely to slow down selling going forward. Higher valuation in India and cheaper valuations elsewhere have been the principal drivers behind the FII strategy.

A persistent feature of FII activity for the last two years has been the sustained FII buying/investment in the primary market. “The relatively lower valuations of IPOs and the preferential allotment to institutions have rendered FII investment through the primary market a highly profitable investment. This trend is likely to continue,” said analysts.

The market enters the new week with a optimistic outlook. Cooling inflation, robust domestic macro fundamentals, and strong earnings momentum offer a constructive setup for the medium term, said Ajit Mishra-SVP, Research, Religare Broking Ltd. The upcoming truncated trading week will be event-heavy, with several key triggers lined up for investors.

On October 21, the one-hour Diwali special muhurat trading session, marking the beginning of Samvat 2082, will be closely watched for sentiment cues and festive cheer, with strong retail and institutional participation anticipate.