New Delhi, Sept. 18 -- Domestic institutions are outbuying foreign sellers, but Indian stocks are still sliding. With the US Federal Reserve raising interest rates for the first time in more than three years-a move that would typically draw foreign money away from emerging markets-the question is: how much protection can domestic money provide?

As of 16 September, domestic institutional investors (DIIs) had bought a net Rs.31,581 crore of equities during the month, comfortably exceeding foreign portfolio investor (FPI) withdrawals of Rs.17,222 crore. Yet the Nifty 50 was down 3.6% since end August.

The Fed's 25-basis-point rate hike, taking the benchmark to 3.75-4.00%, arrived after Indian markets closed that day Wednesday. September fl...