Foreign institutional investors (FIIs) sharply stepped up their purchases of Indian equities on September 2, pumping ₹6,688 crore into Indian shares — nearly six times the buying recorded on Tuesday. Domestic institutional investors (DIIs) bought another ₹2,813 crore, taking combined institutional inflows into the market to ₹9,501 crore.

The accelerated foreign buying came amid broader weakness in Indian markets, suggesting overseas investors turned more active on the day despite subdued price action. The latest inflow marks a continued recovery in FII participation. This followed an earlier session in which foreign investors had returned to buying with an inflow of ₹1,143 crore, after a selloff of nearly ₹8,000 crore in the preceding period.

Institutional fund-flow data, which tracks the day-to-day buying and selling by FIIs and DIIs in Indian equities, is closely watched by market participants as an indicator of direction in overseas and domestic institutional sentiment. FIIs have historically been among the largest non-promoter holders of Indian equities, while DIIs — which include mutual funds, insurance companies, and pension funds — have increasingly acted as a counterweight to foreign flows in recent years. That dynamic matters because sustained FII buying or selling can amplify moves in Indian indices, which carry significant weightage of stocks heavily owned by overseas funds, while steady DII inflows — supported in part by systematic investment plan (SIP) contributions into mutual funds — have cushioned episodes of foreign outflows.

Single-day flow numbers, however, can be volatile, and analysts typically look at multi-week or monthly trends rather than one session's data to judge whether foreign sentiment toward Indian equities has genuinely shifted. Whether the recovery in FII participation extends over the coming sessions will be visible in the daily provisional exchange data.

Source: CNBC-TV18