Indian equity markets witnessed another session of resilience on April 7, 2026, even as foreign capital continued to exit at a significant pace. According to provisional exchange data, foreign institutional investors (FIIs) remained net sellers to the tune of Rs 8,692 crore, while domestic institutional investors (DIIs) stepped in with net purchases of Rs 7,980 crore, effectively cushioning the market from sharper declines.

The divergence in flows has now become a defining feature of the 2026 market narrative. Year-to-date, FIIs have withdrawn approximately Rs 2.08 lakh crore from Indian equities, while DIIs have deployed Rs 2.71 lakh crore. This sustained domestic counterbalance highlights a structural shift in market support, with local institutions increasingly anchoring valuations amid global volatility.

A closer look at the day’s activity reveals the intensity of institutional positioning. DIIs purchased equities worth Rs 20,860 crore against sales of Rs 12,881 crore. FIIs, on the other hand, bought Rs 7,953 crore worth of shares but offloaded a significantly higher Rs 16,646 crore, reflecting continued risk-off sentiment among global investors.

Despite this persistent selling pressure, benchmark indices managed to extend gains for a third consecutive session. The Nifty 50 recovered from early losses to close 155 points higher at 23,123, marking a five day high. However, the recovery was not linear. Markets opened weak, tracking global concerns, before gradually stabilising through the session. Intraday volatility remained elevated, signalling fragile sentiment beneath the surface.

According to Siddhartha Khemka of Motilal Oswal Financial Services, early weakness was triggered by renewed geopolitical tensions following comments from Donald Trump regarding Iran, alongside a spike in crude oil prices. These developments have added a fresh layer of uncertainty to already cautious global markets.

Sectorally, the market showed selective strength. IT stocks emerged as clear outperformers, with the Nifty IT index gaining 2.5% on expectations of a strong March quarter. Attention is now firmly on Tata Consultancy Services, which is set to kick off the earnings season with its Q4 results. Metals also saw traction, rising 1.6% on improving global demand signals and expectations of supportive tariff policies. In contrast, PSU stocks declined 0.7%, indicating rotation away from certain domestic themes.

Broader markets reflected a more cautious undertone. While the Nifty Midcap 100 posted modest gains of 0.2%, the smallcap index slipped 0.1%, suggesting that investors are becoming selective at elevated valuations. This divergence indicates that liquidity support alone may not be sufficient to sustain broad-based rallies going forward.

The global backdrop remains a key overhang. Escalating tensions in West Asia, particularly around the Strait of Hormuz, have heightened concerns over crude oil supply disruptions. Trump’s warning of potential strikes on Iranian infrastructure if the strait is not reopened has amplified geopolitical risk. Elevated crude prices not only impact inflation expectations globally but also pose a direct challenge to India’s macro stability, given its dependence on oil imports.

Adding to the uncertainty is the upcoming RBI monetary policy decision. Markets widely expect the central bank to hold rates steady at 5.25%, but the focus will be on forward guidance, especially in light of the rupee hovering near record lows. Any indication of policy tightening or currency defence measures could influence both equity and debt market flows.

From a market structure perspective, the continued FII outflows raise important questions. Global investors appear to be reallocating capital amid rising geopolitical tensions, stronger US yields, and currency pressures in emerging markets. India, despite its strong domestic fundamentals, is not immune to these global shifts.

However, the consistent buying by DIIs provides a stabilising force. Domestic mutual funds, insurance companies, and pension flows are increasingly acting as shock absorbers, reducing the market’s vulnerability to external capital volatility. This trend could mark a longer-term transition in how Indian markets are supported.