Foreign investors pulled out a record ₹20,637 crore from Indian equities in a single day on Friday. The sharp exit was mainly triggered by MSCI index rebalancing and heavy algorithmic trading. This sudden withdrawal shook the market, with Nifty slipping nearly 1.5% and raising concerns about volatility in foreign flows.
The selloff was linked to passive funds adjusting portfolios after MSCI changes. Experts noted that high frequency trading may have amplified the impact. Nilesh Shah of Kotak AMC questioned whether the volumes were purely MSCI driven or influenced by trading algorithms. Gurmeet Chadha described the activity as suspicious, pointing to speed and money muscle distorting moves.
Domestic institutional investors provided support by buying shares worth ₹16,260 crore, which helped cushion the fall. FPIs accounted for nearly 69% of NSE turnover, highlighting their influence on daily market direction.
MSCI’s reshuffle added Federal Bank, MCX, NALCO and Indian Bank to the index while removing Hyundai Motor India, Jubilant FoodWorks, Kalyan Jewellers and RVNL. Weight adjustments were made in Adani Power, BPCL, Nykaa and Trent. India’s overall weight in the MSCI Standard Index remained steady at 12.3%.
The episode highlights the vulnerability of Indian markets to global fund flows and raises debate on whether algorithmic trading is intensifying volatility.
