Every evening the exchanges publish who bought and who sold. For eleven months the answer has been the same: foreigners sold, domestic funds bought. On Tuesday, for one day, it flipped. Here is why one day is not a turn, and what would make it one.
The flows
FIIs bought ₹1,617 crore of Indian equities in the cash market on 23 September, their first net buy after selling ₹3,810 crore on Monday. It does not change the month: September is still ₹9,810 crore of net FII selling on exchange data, or ₹15,237 crore on NSDL's count, which adds primary-market flows such as IPO subscriptions. Domestic institutions, mutual funds and insurers mostly, bought more than ₹45,000 crore in the same period. Every rupee the foreigners sold, domestic money absorbed, and then bought more.
This is not new. Since October 2024 the shape of the market has been FII out, SIP money in. Monthly SIP inflows above ₹25,000 crore give domestic funds a steady bid regardless of what the index does, and that bid has been the floor under every sell-off.
The floor is not the direction
A floor is not a trend. The Nifty closed at 23,447, roughly 7% below where it stood a year ago. Domestic buying has stopped the market falling; it has not made it rise. That is the difference between a bid that shows up every month by standing instruction and a bid that shows up because the buyer expects to make money. The first sets the floor. The second sets the direction, and for a year it has been the seller.
What has changed: valuation
A year of a flat-to-down index and rising earnings has done what corrections do. The Nifty now trades at about 19.7 times trailing earnings, against a ten-year average of 23.3 times. This is the first time in this cycle that the index is cheaper than its own long-run average. Foreign selling has been running into a market that is no longer expensive, which is a very different setup from the one in late 2024 when the same selling ran into a market at 25 times.
What has not changed: the rupee
FII selling weakens the rupee whether or not a domestic fund buys the shares, because the foreigner converts the rupees to dollars on the way out and the domestic buyer does not bring dollars in. A weaker rupee raises the hurdle for the next foreign buyer, who has to earn the currency loss back before the equity return counts. This is the part of the loop the DII bid cannot fix.
What would turn it
Two things, in order. First, the FII selling has to slow into the Q2 results season in October; a month of ₹15,000 crore of outflows cannot be offset by valuation alone. Second, Indian companies have to deliver the earnings that the lower multiple now assumes. On the first, the macro backdrop is turning: S&P, Moody's, JPMorgan and Bank of America have each raised their India GDP forecasts in recent weeks, and foreign allocators follow growth revisions with a lag. Tuesday's ₹1,617 crore is the first data point in that direction. It needs a week of them before it means anything. My read is that the FII selling ends when those upgrades meet a good results season, and not before.
Verdict
The DII bid sets a firm floor, but the index needs FII selling to slow into the Q2 results season to turn the direction. With the GDP upgrades from S&P, Moody's, JPMorgan and BofA, the selling is closer to its end than its beginning; the trigger is earnings.
Educational purposes only, not investment advice. DYOR.
Sources: NSE provisional FII/DII cash-market data, 22 and 23 September 2026 and September month to date; NSDL FPI statistics; NSE Nifty 50 closing level and trailing P/E, 23 September 2026; India GDP forecast revisions by S&P Global, Moody's, JPMorgan and Bank of America, September 2026.
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