Foreign portfolio investors (FPIs) emerged as big sellers in the Indian equity market on Friday. They withdrew a total of Rs 20,637 crore in a single session, which is one of the biggest single-day sales in recent years. This happened when the market was struggling with the impact of recent changes (rebalancing) in the MSCI indexes. According to ACE Equity data, the biggest decline before this had happened last month (April 2, 2026), when FIIs had withdrawn Rs 19,837 crore in a single day.
This selling happened when the benchmark indices fell 1.5 percent. Market experts attributed most of the weakness at the end of the session to the inflow of passive funds related to changes in the index. The scale of activities of foreign investors was remarkable not only because of the large amount of money withdrawn, but also because of the huge volume of trading that took place during the session. Of the total NSE turnover of Rs 287,452 crore, the share of FPIs was Rs 198,465 crore. According to preliminary data of NSE, this was about 69 percent of the total trading volume of that day.
increase in volume
Although FPIs made a total net sale of Rs 20,637 crore at the end of the day, they traded almost 9.6 times this amount during the session. In comparison, domestic institutional investors (DIIs) were net buyers worth Rs 16,260 crore. They traded a total of Rs 53,772 crore, which was about 3.3 times their net purchase amount. This heavy participation raised questions about whether this activity was entirely due to changes in MSCI-linked portfolios, or whether high-frequency trading (HFT) strategies increased the amount of trading volume at the time of index changes. This huge volume of trading also sparked debate over how much of the reported withdrawals by foreign investors actually reflected portfolio changes, and how much might be related to short-term trading activity.
what do experts say
Nilesh Shah, MD, Kotak Mahindra Asset Management, questioned whether this surge in activity was surprising, given that the Indian equity market is not the main investment hub for FPIs at the moment. He also asked whether Friday’s heavy trading was entirely due to changes in MSCI, or whether high-frequency trading (HFT) activity that occurred at the time of the index change had increased trading volumes. Shah further raised the question as to how much of the reported net FPI outflow of Rs 20,637 crore could be due to HFT trades.
Market expert Gurmeet Chadha also raised questions on the sudden increase in trading volume and said that the market movement is being distorted by using ‘speed and power of money’. He further said that even when Brent crude was around $90 per barrel and there was hope of a deal over the weekend, 31,000 short contracts were added. Describing this activity as suspicious, he said, ‘We have to take action and catch this cartel.
According to Abhilash Pagaria, Head of Alternative and Quantitative Research at Nuwama Wealth, due to rebalancing there was an outflow of about Rs 8,000-8,500 crore. He said this figure was slightly higher than the previous reviews, due to free-float adjustments in stocks like Bajaj Finance, HUL and TCS. He described this effect as a ‘one-time adjustment’ due to a new methodology.
MSCI changes
In MSCI’s latest review, Federal Bank, MCX, NALCO and Indian Bank were included in the MSCI Standard Index, while Hyundai Motor India, Jubilant FoodWorks, Kalyan Jewelers and RVNL were removed. These changes came into effect after the close of trading on May 29. As a result of this review, the weightage of Adani Power, BPCL, Nykaa, Trent and OFFS also increased. Despite this reshuffle, India’s overall weightage in the MSCI Standard Index remained broadly stable at around 12.3 per cent, compared to 12.4 per cent earlier. The total number of Indian companies included in the index also remained unchanged at 165.
Apart from the standard index, MSCI also announced major changes in its small cap index. According to Nuvama, more than a dozen Indian stocks were dropped from the index, reducing the number of Indian stocks from 474 to 459. Newly added stocks included Ireda, Anthem Biosciences, Fractal Analytics, Pine Labs and Emmvee Photovoltaic, while Cello World, Redtape, Raymond Lifestyle, Indigo Paints, Balu Forge and Blue Jet Healthcare were ousted. Trading volume typically increases on index review days as passive funds tracking the MSCI benchmark adjust their holdings to the new structure.
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