Foreign institutional investors ended their unprecedented selling streak on Friday, purchasing ₹1,165.92 crore worth of Indian equities after net-selling ₹6.13 lakh crore since July 2024 when Finance Minister Nirmala Sitharaman announced capital gains tax increases. According to CNBC TV18, this marked a significant reversal from Thursday's ₹5,285.37 crore outflow, bringing the total FII selling to 13 consecutive sessions in 2026. The net selling in October crossed ₹45,400 crore so far, worse than the ₹35,861 crore sell-off recorded in September, with October 2026 net selling reaching ₹47,417 crore through October 12. The sustained selling pressure has contributed to the Nifty's 14% decline so far in 2026, with the Sensex and Nifty 50 down 15.60% and 14.4% respectively.
Indian equity benchmarks ended higher on Friday despite mixed institutional flows, with the Sensex rising 413 points to close at 74,729 and the Nifty gaining 149 points to settle at 23,146, holding above the 23,100 mark. As per CNBC TV18, the Nifty IT index extended its rally for a fourth consecutive session, rising nearly 4% as tech stocks led the market surge. Tech Mahindra posted its biggest single-day gain since March 2020 after announcing its second-quarter results and a bonus issue, while Tata Consultancy Services (TCS) extended its post-results rally and was up nearly 19% since reporting its Q2 results on October 8. Onward Technologies surged 20% following strong quarterly earnings, and Wipro rose nearly 6% after saying deals deferred from the September quarter were expected to move into the December quarter. However, IndiGo was the biggest Nifty loser after the government told the Supreme Court that rules on air fares had been finalised.
Domestic institutional investors turned net sellers on Friday, selling equities worth ₹3,661.28 crore despite the market rally, according to CNBC TV18. Their purchases stood at ₹17,201.80 crore, against sales of ₹20,863.08 crore. This marked a reversal from the previous session when DIIs had bought shares worth a net ₹3,319.39 crore. The midcap index fell 67 points to 59,130 for a second straight session, while the Nifty Bank edged up 33 points to 55,844 ahead of key banking earnings. Capital market stocks came under pressure with BSE falling more than 2% following a revised framework for consolidated account statements (CAS). Jewellery stocks advanced with Senco Gold and Sky Gold gaining more than 5% each, and Federal Bank ended slightly higher after reporting better-than-expected second-quarter results.
Finance Minister Nirmala Sitharaman's recent comments on LTCG and STT have sparked renewed hopes for tax relief among foreign investors. Following her remarks, benchmark indices Sensex and Nifty jumped over 1.5% each, though FIIs remained net sellers with ₹1,305 crore outflows according to provisional NSE data. The tax overhaul announced in July 2024 increased short-term capital gains tax from 15% to 20% and long-term capital gains tax from 10% to 12.5%. Gurmeet Chadha from Complete Circle Consultants estimates that if the finance minister reduces LTCG and STT, India can attract over $150 billion of FII and FDI flows in the next three years, surpassing FCNR deposits while increasing capital gains and STT collections. However, analysts remain divided on whether any tax rejig can trigger a sustained FII comeback.
The US Dollar Index (DXY) has surged over 4% year-to-date in 2026, jumping nearly 3% in just the last 30 days after falling over 12% in 2025. As per The Financial Express, this strength is making returns on dollar-denominated assets significantly more attractive for foreign institutional investors. The Indian rupee has weakened 5.9% year-to-date and is down over 6.5% in the last year, trading around ₹95.74 per US dollar as of October 13. Sneha Pandey from Quantum AMC explains that "three forces have converged: the Fed raised rates by 25 bps to 3.75%–4.00% on 16 September, US 10-year yields have moved to multi-decade highs above 5.3%, and the euro has softened on French fiscal concerns." The ₹2.92 lakh crore in FII sales recorded so far in 2026 represents the highest sales on record, with ₹41,486.99 crore net outflows recorded in the first seven trading days of October alone.
