FIIs Make Highest Net Purchases Since February as IT Crash Fuels Sector Rotation on D-Street

The Quick Take

• Foreign Institutional Investors (FIIs) made their highest net purchases in Indian equities since early February, even as the IT sector crashed
• Domestic Institutional Investors (DIIs) switched to sell mode, partially offsetting the FII buying surge
• FIIs have pulled out Rs 2.85 lakh crore in net over recent months, making the current buying reversal a significant sentiment shift

FIIs recording their highest net purchases in Indian equities since early February — even as the IT sector experienced a crash — represents a notable divergence in cross-sector sentiment among institutional investors. The FII buying surge suggests that foreign investors are selectively re-entering Indian equities, potentially driven by valuation re-rating in non-IT sectors following the recent IT-led market correction. With FIIs having pulled out Rs 2.85 lakh crore in net terms over recent months, the current reversal indicates that a threshold of valuation attractiveness may have been reached in select sectors — financials, industrials, consumer, and infrastructure names that had corrected in sympathy with the IT sell-off.

The DII switch to sell mode is an equally informative signal. Domestic mutual funds and insurance companies shifting to net selling while FIIs are net buying is a classic institutional handoff pattern: domestic investors who held through the FII sell-off are now booking profits as the marginal buyer switches from domestic retail and DIIs to foreign institutions. This FII-DII divergence creates a technical setup where FII momentum is the dominant near-term flow driver, and any deceleration in FII buying would face limited DII support at current levels. The IT sector crash providing the backdrop adds a sector-rotation dimension — funds likely moving from overweight IT into underweight financials and manufacturing names.

Watch for weekly SEBI FII/DII net flow data over the next 3-4 weeks to confirm whether this is the start of a sustained FII re-entry or a single-session tactical rebalancing. The Nifty IT index recovery trajectory will also be critical: if IT stabilizes, it removes a key overhang on overall market sentiment. The macro variable is the rupee-dollar trajectory: a strengthening rupee reduces currency risk for FII returns on Indian equity investments, making INR stability or appreciation a significant enabler of sustained FII inflow into D-Street in 2026.

Synthesized from 1 source.