Foreign institutional investors (FIIs) have offloaded Indian equities worth Rs 45,125 crore in just six trading sessions this October, nearly matching the Rs 45,536 crore outflows recorded for the entire month of September. This aggressive selloff has exerted significant pressure on India's stock market, which has experienced heightened volatility.
The Indian stock market managed to break an eight-week losing streak last week, closing with gains despite notable fluctuations. However, FIIs have maintained a bearish stance, continuing to sell Indian equities in every session of October so far. This trend marks 11 consecutive sessions of net selling by foreign investors since mid-September.
The surge in FII outflows is largely attributed to the rising bond yields, which have reached multi-year highs. The 10-year US Treasury yield, for instance, recorded its largest quarterly increase of the 21st century in the three months ending September. The yield climbed above 5.3%, surpassing its 2007 peak and reaching levels not seen since early 2002. Similarly, the 30-year yield has touched 5.6%, a figure last observed in 2002.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, highlighted that the rapid acceleration in FII outflows has brought the total foreign portfolio investor (FPI) equity selling in 2026 to an astounding Rs 3,60,952 crore. He noted that this massive FPI selling is a primary reason for the Indian market's underperformance this year, with the Nifty showing negative returns of 13.87% so far in 2026.
The current market conditions are driven by the attractiveness of risk-free returns from US bonds, which are above 5.2%. Vijayakumar explained that the trend of FII outflows might reverse when valuations become appealing and the risk-reward ratio turns favorable for investment. Until then, the market faces headwinds from elevated crude prices and high US bond yields.
Investors are closely monitoring several factors that could influence the market's direction in the coming weeks. These include US and Indian inflation data, US bond yields, Brent crude prices, and geopolitical tensions involving the US and Iran. These elements are expected to play a crucial role in determining the market's trajectory.
From a technical standpoint, the Nifty could find immediate support in the 22,350–22,330 zone, according to the Head of Technical and Derivatives Research at SBI Securities. A decisive move below this zone might trigger renewed selling pressure towards 22,200. Conversely, the 22,660–22,680 zone, which aligns with the 10-day EMA, could act as an immediate hurdle. A sustained move above this zone might lead to short covering and extend the pullback towards 22,820. Despite the recent recovery, sustained buying is necessary for confirmation.
