Optimistic stock market, impressive GDP numbers warrant change in FII strategy

Analysts suggest foreign institutional investors (FIIs) may reconsider their strategies following recent market optimism and robust GDP performance.

While foreign portfolio investment flows show no clear directional pattern currently – with FIIs alternating between buying and selling positions – experts note this signals potential shifts as economic conditions evolve. Data through November 29 reveals FIIs sold equities worth ₹15,659 crore while investing ₹11,894 crore in primary markets.

Geojit Investment’s Chief Investment Strategist Dr. VK Vijayakumar highlighted important market shifts: “November 27 marked a significant milestone with both Nifty and Sensex achieving historic highs after 14 months. This resurgence reflects confidence from stronger Q2 corporate earnings and expectations of continued growth through FY27, with consensus projections indicating sustainable 15-16% earnings expansion.”

India’s Q2 GDP growth of 8.2% significantly exceeded forecasts, demonstrating economic resilience amid global trade challenges. Vijayakumar emphasized: “The manufacturing sector’s exceptional 9.1% growth and 7.3% expansion in Gross Fixed Capital Formation highlight structural strengths. Equally encouraging is the 7.9% rise in consumption expenditure, signaling revived demand that could stimulate future investment.”

Domestic equity markets extended gains for the third consecutive week, achieving fresh record highs amid favorable global sentiment and strong local fundamentals. After initial profit-taking, benchmarks rebounded strongly mid-week before consolidating. The Nifty closed at 26,202.95 (weekly gain: 0.52%) while the Sensex settled at 85,706.67 (weekly gain: 0.56%).

Religare Broking’s Ajit Mishra noted: “Broader market participation remains selective despite improved sentiment. Midcaps demonstrate relative resilience while smallcaps face profit-booking pressure. Sector leadership continues to be determined by institutional demand patterns.”

(Inputs included from external sources)