FIIs to resume equity purchases in India as bulls roar: Analysts

Sensex and Nifty surged more than 2.7 per cent in the morning trade.

According to market watchers, the prime mover of the rally will now be the FII buying, which has been sustained for 16 continuous days except last Friday when the conflict escalated.

"Domestic macros like expectations of high GDP growth and revival of earnings growth in FY26 and declining inflation and interest rates augur well for the resumption of a rally in the market," said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

FIIs favour large caps like ICICI Bank, HDFC Bank, Bajaj Finance, L&T, Bharti, Ultratech, M&M and Eicher. Midcap IT and digital stocks are other segments to watch.

Pharma stocks may come under near-term pressure from US President Donald Trump's latest announcement regarding reducing prices of drugs in the US.

"There are rumours of impending US deal with China on trade but details are yet to come. If a deal materialises that would be good for the global economy," said Vijayakumar.

The hallmark of FPI investment in recent days has been the sustained buying by FIIs. FIIs bought equity through the exchanges consecutively for 16 trading days ending 8th May for a cumulative amount of Rs 48,533 crore.

"They sold for Rs 3,798 crore on 9th May when the India-Pak conflict got escalated. Now that ceasefire has been declared, FIIs are likely to resume their equity purchases in India," said analysts.

It is important to understand that FIIs were continuous sellers in India in the first three months of this year. The big selling began in January (Rs 78,027 crore) when the dollar index peaked at 111 in mid-January.

Thereafter, the intensity of selling declined. FIIs turned buyers in April with a buy figure of Rs 4,243 crore.