Can markets absorb FII selling?

A lot hinges on domestic investors for Indian equities to hold up

What gathered momentum through the course of the year lost steam as two critical events — Donald Trump winning the US presidential election and demonetisation — played out in November. Foreign institutional investors (FIIs), which were largely buyers of Indian equities, started reducing their exposure to India significantly. While this strategy is in tandem with their approach on emerging markets (EMs), India has seen a higher share of selling pressure, particularly since November 8 (see table), partly because it has also been among the favourites of foreign investors. Possibility of three interest rate hikes by the US Fed (versus two