For most of the past two years, Indian markets had to absorb steady selling by foreign investors. Wednesday's session suggested that may be changing.

The Sensex and Nifty opened slightly lower as Asian markets came under pressure from technology stocks over worries about AI spending. The Sensex started at 76,853.11, down 64.74 points, and the Nifty opened at 23,742.25, down 68.60 points. By mid-morning both had turned positive. The Sensex was trading around 0.5 per cent higher at 77,251, and the Nifty was at 23,912.50, up 101.65 points or 0.43 per cent.

The gains were not spread evenly. Nifty Consumer Durables, Nifty Realty and Nifty IT fell up to 0.79 per cent, and metal, energy, private bank and PSU bank indices were also down. Healthcare and pharma were the main gainers, with Nifty 500 Healthcare, the Nifty Healthcare Index and Nifty Pharma rising up to 0.23 per cent.

The FII reversal is the real story

The index levels matter less than who is buying. FIIs have been net buyers in five of the last six trading sessions and have put Rs 18,661 crore into Indian equities. On Tuesday alone they bought a net Rs 6,836 crore, their third straight day of buying.

Domestic institutions moved the other way. DIIs sold for a third session in a row, with net outflows of Rs 3,678 crore. Over the past two years, domestic funds usually supported the market while foreigners sold. Now foreign investors are buying and domestic funds are booking profits.

Market experts said the shift has clear reasons behind it: "Sustained selling by FIIs have been weighing on the market for last two years. This is changing now. Buying volume is increasing. Good corporate earnings and attractive valuations in large-caps is providing fundamental support to rally. Weakening of AI trade also facilitated return of FIIs."

The last point helps explain the timing. Earlier, global money was concentrated in AI-linked technology stocks. As that trade weakens, Indian large-caps look attractive again. Analysts expect the rally to be led by large-cap stocks that can draw big FII flows, with leading financials having the most room to rise. They added that short covering could also help the move continue.

What the charts say

On the technical side, the Nifty is trading above its 50-day EMA near 23,196, and its RSI of 66.59 points to strong bullish momentum. However, an RSI that high also means profit booking cannot be ruled out. The put-call ratio has improved to 1.30, a sign that traders are more confident.

The next test is close by. The 200-day EMA near 23,904 is the first hurdle. Above that, the 24,000–24,200 range is the main resistance zone. If the index falls back, support is placed at 23,500–23,600.

Global markets remain a factor. US stocks closed higher, led by the Nasdaq, as large AI stocks recovered ahead of the US midterm results. Apple fell after disappointing earnings, which shows that global sentiment is still unsettled.

For retail investors, the key point is that one strong session is not a trend. If FII buying continues for several weeks, though, the Nifty's move toward 24,000 would rest on a more solid base than it has had for a long time.