India's stock markets are experiencing a self-reinforcing cycle of foreign selling and currency weakness, according to veteran market analyst Sandip Sabharwal of asksandipsabharwal.com. As reported by The Economic Times, this vicious cycle persists even as domestic earnings hold up better than feared, with Q4 results showing decent performance across sectors. Consumer companies are signalling sustained demand, capital goods firms are reporting healthy order books, and financial sector results have held up, providing a floor to the market despite foreign outflows. GIFT Nifty futures traded at 23,674 in early Asian trade on Tuesday, down 194.50 points or 0.81 percent, indicating a gap-down open of approximately 150 to 200 points for the Nifty 50.
Despite foreign selling pressure, domestic investors remain the quiet backbone of Indian markets, with Sabharwal calling this structural and permanent. According to The Economic Times, retail India's habit of investing monthly through SIPs is now deeply ingrained and will not break unless the country goes into a prolonged recession or markets fall more than 25 to 30 percent, both scenarios considered unlikely. The analyst emphasizes that retail trading activity is not expected to snap back immediately, highlighting the importance of steady domestic institutional support. Analysts at Motilal Oswal Financial Services recommend avoiding aggressive positions in the first 15 minutes given elevated VIX near 18 and live crude oil headlines that can create false breakouts at the open.
Despite continued foreign investor outflows, domestic investors are emerging as the backbone of the market, helping benchmark indices remain resilient despite global uncertainty. As per The Economic Times, domestic institutional investors have invested nearly $35 billion so far this year, comfortably offsetting roughly $22 billion in FII outflows. Market veteran Gautam Trivedi from Nepean Capital highlighted that money flow coming in from retail investors into mutual funds, into insurance companies, and of course on top of that you have the pension funds adding as well. The sustained inflows underline growing confidence among domestic investors, with March seeing ₹40,000 crores of net inflows and April recording ₹38,500 crores of net inflows. Trivedi noted that India now has around 130 million unique investors, but equity ownership remains heavily concentrated in a few states, with the top 10 states accounting for 73% of the unique investor base.
Foreign Portfolio Investors (FPIs) turned net sellers of ₹8,437.56 crore on May 11, 2026, marking one of the largest single-session FII outflows in the current West Asia-driven risk-off cycle. As per Univest, cumulative FII outflows in 2026 have reached approximately $20.6 billion, exceeding total 2025 outflows. The Indian rupee slipped 19 paise to a new record low of ₹95.50 against the US dollar, breaching the previous record of ₹95.33 set on April 30. Brent crude futures rose 0.29 percent to $104.51 per barrel in early Asian trade, with Goldman Sachs warning that global oil inventories could fall to 98 days of demand by end of May 2026. The RBI has intervened significantly, reportedly spending $12 billion defending the rupee since the West Asia conflict began, with forex reserves declining from their peak of $728.5 billion.
US equity markets showed mixed performance overnight, with the Nasdaq rising 1.71 percent, providing a direct tailwind for Indian IT stocks at Tuesday's open. As per Univest, Infosys, TCS, HCL Technologies and Wipro are likely to outperform the broader Nifty 50 in the Indian stock market today as the Nasdaq rally translates into stronger IT sector sentiment. However, Gautam Trivedi remains cautious on the IT sector until companies demonstrate stronger AI-led growth strategies, noting that TCS, Infosys and HCLTech have hit new 52-week lows despite their strong balance sheets. Bank Nifty outperformed the benchmark index on May 11, a constructive divergence that Kunal Singla, Associate Director at Univest, highlights as the key positive signal. Trivedi expressed optimism about power, data centre-linked businesses, hospitality and exporters, citing strong performance of Indian Hotels Company Limited and rising domestic travel trends that could benefit hospitality companies.
