Domestic Funds Prop Up Indian Stocks as Foreign Investors Keep Selling

Sensex closed almost exactly where it started on Thursday, up just 1.44 points at 77,186.87. The Nifty slipped 5.75 points, or 0.02%, to settle at 24,072.75, giving back a chunk of an early rally that had briefly pushed the index more than 100 points higher.

Foreign institutional investors (FIIs) sold a net Rs 4,200 crore of equities that session, their fourth straight day of selling. FIIs are the overseas funds and pension pools that trade Indian shares under rules set by the Securities and Exchange Board of India (SEBI). Domestic institutional investors (DIIs), mostly Indian mutual funds, insurers and banks, bought a net Rs 2,986 crore, stretching their own buying streak to seven sessions.

That standoff, not the flat headline print, decided the day. A chip stock rout on Wall Street, a fresh oil price spike out of the Middle East and a wobbling dollar all leaned on sentiment. Domestic money held the line anyway.

A Volatile Session Erases the Day’s Early Gains

GIFT Nifty had pointed to a firm open near 24,143 ahead of Thursday’s bell. Indian benchmarks obliged at first, climbing through the morning on buying in IT stocks and select heavyweights.

The mood flipped after lunch. Sensex fell as much as 493 points off its intraday high before clawing back to end barely positive. Nifty swung between an intraday high of 24,186 and a low of 24,050 in the same session.

Bajaj Finance, Mahindra & Mahindra, ITC, Reliance Industries, Infosys and Maruti Suzuki gained. HDFC Bank, Eternal, Bharat Electronics, Axis Bank, SBI Life Insurance and Bajaj Finserv dragged the index the other way. HCL Technologies was the session’s best performer on the Nifty 50, up 1.86% to Rs 1,190.

Market breadth turned negative by the close, with 1,776 shares falling against 1,543 advances on the NSE. The rally under the surface was thinner than the flat headline number suggested.

Sector moves were sharper than the index itself. Media, IT and auto stocks led gainers while banks, metals and realty shares cracked. Some of the swings traced back to the weekly expiry of Sensex futures and options, a source of volatility that has grown more pointed since F&O volumes cooled under RBI’s tighter collateral rule earlier this year.

Individual results added their own noise. ABB India surged 10% to a 52 week high of Rs 7,924.50 after its parent reported an 81% jump in India order inflow. ICICI Lombard General Insurance tumbled as much as 15% after its profit dropped 46% to Rs 403.17 crore in the June quarter, down from Rs 747.08 crore a year earlier.

A Chip Stock Rout and a Middle East Oil Spike

Asian equities fell for a second straight day as the selloff in chipmakers deepened, on mounting concern that massive artificial intelligence investment may not be justified by current valuations.

Wall Street felt it first. The Nasdaq Composite dropped nearly 400 points, or 1.47%, the S&P 500 lost 0.51% and the Dow fell 0.20% on Thursday, even as big banks opened a strong second quarter earnings season. Markets slid after Taiwan Semiconductor Manufacturing massively hiked its capital expenditures for 2026, reviving worry that AI infrastructure spending has outrun near term returns.

The reversal had been building for weeks. Micron Technology alone had surged 884% over the past year before the sector’s early July pullback, a run steep enough that even small cracks in the AI narrative were bound to hurt.

Geopolitics piled on. Iran’s army said it targeted a fixed radar site, fuel depots and communications systems at the US military’s Azraq Air Base in Jordan using attack drones, while US Central Command said it had completed its latest wave of strikes against Iran, part of a conflict then in its sixth day.

• 11%+ – Brent crude’s gain for the week, its steepest since April, after the contract rose 0.7% to $84.83 a barrel.
• 1.47% – The Nasdaq Composite’s drop on chip stock weakness, even as earnings season opened on a strong note.
• Biggest weekly loss since early June – Gold’s trajectory, as Middle East tension raised the odds the Fed may need to keep rates higher for longer.
• 4.55% and 4.14% – The 10-year and 2-year US Treasury yields, both up marginally even as the dollar index headed for a weekly decline.

None of it was India specific. All of it showed up in the way Nifty gave back its morning gains.

Indian equities concluded largely subdued as investors remained cautious amid geopolitical uncertainties, fluctuating oil prices, and weak Asian market trends.

Vinod Nair, head of research at Geojit Investments Limited, said corporate earnings and monsoon progress would be the next catalysts, with global and inflation developments still setting the tone for Indian markets.

Four Days of Selling Meet Seven of Buying

Zoom into the flow data and the tug of war sharpens. FIIs had sold on each of the last four trading sessions. DIIs had bought on each of the last seven, a streak that predates this week’s bout of global turbulence.

On every single day in that stretch, domestic buying either outweighed or nearly matched what foreign investors pulled out. It is a big part of why the index closed flat instead of red. The pattern has repeated through the month, including the session where sellers returned into the close and erased what had looked like a firm recovery.

Who Is Buying While Foreign Investors Sell?

Domestic institutional investors, primarily Indian mutual funds, insurance companies, banks and pension linked funds, are the buyers. They draw on steady inflows from retail savings, which give them fresh cash to deploy even in weeks when overseas funds are pulling money out of Indian equities.

Examples of DIIs include Indian banks, non-banking financial companies, insurance companies and mutual fund houses. FIIs, by contrast, are the sovereign wealth funds, pension pools and global asset managers that invest in India through SEBI’s foreign portfolio investor framework.

The National Securities Depository Limited (NSDL) tracks foreign portfolio flows into India. It recently began publishing daily figures on domestic institutional activity too, a step meant to help market participants gain enhanced visibility into DII investment patterns alongside foreign flows.

The timing made sense. Domestic funds had already become a stabilizing force through 2026, repeatedly offsetting foreign outflows during bouts of volatility tied to the Middle East and to swings in global tech valuations.

A Familiar Pattern for Domestic Money

Domestic money has held this line before. FIIs were aggressive net sellers in the January to March quarter, recording the fiscal year’s highest quarterly outflow at Rs 1,31,122 crore, according to a Ventura Securities report. DIIs delivered their strongest quarterly support of the year in response.

Goldman Sachs has put a number on the broader retreat. The bank said India had been used as a funding market through the first half of 2026, leading to record outflows of $30 billion in barely three months. Nifty returns hit a three decade low over that stretch, with the index down 9%.

The same Iran war rattled capital well beyond Indian equities. China shed $41 billion in US Treasuries as the fighting spooked foreign holders of American debt, a sign this year’s capital flight has run wider than one market.

Single weeks have been rougher than this one too. In an early June stretch, FIIs pulled out Rs 31,114 crore from Indian equities while DIIs bought Rs 33,933 crore, a far bigger tug of war than the one playing out this week.

A New Fed Chair and Earnings Season Are Next

Earlier this week, Goldman Sachs said in a note that “foreign selling is likely over, and sentiment should turn incrementally favourable on improved domestic outlook and ultra-light foreign positioning,” projecting Nifty could climb 10% to 26,500 within a year.

The daily tape complicates that call. FIIs turned net buyers only briefly around mid-June, by Goldman’s own account, before the current four session selling stretch took hold.

Two other variables sit just ahead. The April-June earnings season, Q1 of fiscal year 2027 in Indian parlance, is already moving individual stocks sharply. And the Federal Reserve, now under new chair Kevin Warsh, remains a wildcard for global risk appetite as investors parse his early policy signals.

Domestic institutions have now bought for seven straight sessions against four straight of foreign selling.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Stock market investments carry financial risk, and figures cited are accurate as of publication on July 17, 2026. Readers should consult a SEBI-registered investment advisor before making investment decisions.