New Delhi, Sept. 18 -- A 25-basis-point rate cut and signals of additional cuts this year by the US Federal Reserve have raised speculation that foreign institutional investors (FIIs), who have been relentlessly selling Indian stocks since July, may return to the Indian market. Lower US rates could soften the dollar and drag down bond yields, prompting FIIs to look at emerging markets for better returns.

FIIs have sold off Indian stocks worth Rs.1.06 lakh crore in the cash segment since July. In September till 17th, they have offloaded Indian stocks worth over Rs.11,000 crore in the cash market.

Weak earnings and stretched valuations of the Indian stock market have been key factors driving FIIs away from the Indian markets. Tariff-relat...