Explained: Why is Indian market breaking record highs in May despite FPI outflows?

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₹35,000 crore in May so far. This move is attributed to multiple factors, including high valuations in the Indian market, a shift in investment focus towards China and Hong Kong due to their comparatively lower valuations, delays in anticipated interest rate cuts by the US Federal Reserve, rising US bond yields, heightened tensions in the Middle East, and the strength of the US dollar.Despite these significant outflows, the Indian stock market has displayed remarkable strength and resilience.

This resilience can be attributed to the robust participation of Domestic Institutional Investors (DIIs) and retail investors, who have provided substantial support amid the predominant selling pressure. Also Read: FPIs continue to dump financials, IT, FMCG shares in May.

What lies ahead?Their active involvement has laid a solid foundation for the market, effectively countering the impact of the substantial FPI withdrawals. Media reports indicate that FPIs were net sellers for most of May, withdrawing ₹35,527 crore from the Indian stock market.Conversely, DIIs countered this trend by investing even more, with ₹41,720 crore injected during the same period.

This influx led the benchmark indices, Nifty 50 and Sensex, to touch record highs multiple times in May.In the previous session, the Nifty 50 reached a record high of 23,100 points, marking the fourth time it set a new record. Similarly, the Sensex registered a new lifetime high of 76,009 points, achieving record highs three times in May.The Indian household sector plays a vital role in the country's economy, contributing significantly to the overall gross domestic savings.