The Indian stock markets have been on a downward trend for the past two months due to various factors such as subdued Q2 earnings, a rising dollar index, and selling by foreign institutional investors (FIIs).

However, there has been a recent slowdown in FII selling, with net sales dropping to Rs 1,403 crore on Monday, compared to an average of Rs 3,800 crore daily since early October. This was accompanied by consistent buying from domestic institutional investors (DIIs), which temporarily improved investor sentiment.

Despite this temporary improvement, FII selling surged again on Tuesday, reaching Rs 3,411.73 crore. Ajit Mishra, Senior Vice President of Research at Religare Broking Ltd, highlighted the importance of sustained momentum over the next week or two to establish a reliable trend. While DIIs continue to provide strong support through their buying activities, the participation of FIIs remains crucial for overall market sentiment.