Strong foreign fund flows keep Indian markets afloat amid Pakistan tensions

Dubai: Indian stocks traded cautiously Wednesday, reflecting investor unease amid rising tensions with Pakistan. Benchmark indices Sensex and Nifty erased early losses at closing, with strong foreign fund flows lending further support.

By Wednesday’s closing, the Sensex had risen 105 points to hover around 80,746, after dipping 130 points to hover around 80,510 by mid-morning. Meanwhile, the Nifty inched up by 35 points, closing at 24,407 points, after earlier slipping by 47 points to trade at 24,332.

Despite opening on a cautious note amid rising regional tensions and anticipation around the US Federal Reserve’s upcoming interest rate decision, the Indian stock market found support in continued foreign investor interest. Analysts say that strong foreign institutional investment (FII) inflows are acting as a buffer against broader uncertainty.

In just 14 trading sessions, foreign investors have collectively brought in close to INR440 billion, helping to stabilise the markets in the face of global and regional pressures.

“India’s economic performance stands out compared to other large economies,” said one market strategist. “With sluggish growth forecasts in the US and China, and a softer dollar, international investors see India as a relatively attractive bet.”

Steady overseas backing

The positive momentum from FIIs is further strengthened by solid domestic earnings reports, giving investors additional confidence. Still, many are treading cautiously due to lingering uncertainty, waiting for clearer signals before fully committing.

Market experts warn that volatility may continue in the short term, especially as geopolitical tensions can spark temporary pullbacks—even when economic fundamentals are sound. During such periods, investor sentiment can drive swift market shifts.

That said, the overall sentiment remains cautiously optimistic. Traders are keeping a close eye on both global economic developments and domestic policy movements. Should the external environment become more stable, analysts believe we could see renewed activity from investors currently sitting on the sidelines.

At present, the dual support of strong foreign inflows and better-than-expected earnings is helping to keep Indian markets on firmer ground. The gold rate too set a new record in Dubai before slipping - but not by much as gold continues to keep its volatility hat on.