Domestic Investors Come to the Rescue After Fed Rate Hike, but Correction Still Seen

Domestic institutional investors (DIIs) stepped up buying in Indian equities after the U.S. Federal Reserve raised interest rates for the first time in more than three years.

Official response and confirmed impact

The rate hike triggered concerns that higher yields in the U.S. could attract funds away from emerging markets, putting pressure on Indian equities.

Domestic investors, however, helped counter foreign outflows.

DIIs bought shares worth Rs 12,504 crore in September, while foreign investors sold equities worth Rs 10,825 crore during the same month.

Despite this support, the Nifty 50 plunged 6.4 per cent, marking its sharpest decline during a Fed rate hike cycle in recent times.

The inflows from domestic investors provided some support but were not enough to prevent the market correction.

The latest U.S. Federal Reserve rate hike has once again highlighted the growing role of domestic institutional investors in the Indian equity market.

While DII buying helped cushion the impact of foreign selling, it could not completely offset the pressure.