FPIs turned net buyers of Indian equities in July and August after six months of selling. Currency stability and a 17.7% earnings beat are driving the reversal, with the IPO pipeline adding momentum.
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After six months of relentless selling, foreign portfolio investors are coming back to Indian equities. The turnaround is not dramatic – cumulative flows for 2026 are still deeply negative – but the direction has shifted.
FPIs sold ₹2.74 lakh crore in Indian equities between January and June. In July they bought ₹20,200 crore. Through August 21 they added another ₹23,544 crore. The combined equity outflow for 2026 has narrowed to ₹2.31 lakh crore, but the pace of selling has reversed sharply since July.
The broader picture is similar. Total FPI flows across equity, debt, hybrid instruments, mutual funds and alternative investment funds turned positive in July at ₹40,031 crore and stayed positive at ₹20,802 crore so far in August. The numbers suggest the worst of the selling cycle is behind, several market participants said.
A key driver is currency stability. The rupee has traded in a ₹95-97 per dollar range, and foreign investors are focusing on stability rather than a specific level.
"What they would want is stability. It should not keep on depreciating," said Vishad Turakhia, Managing Director and CEO of Equirus Securities.
Support for the rupee is coming from foreign currency inflows. FCNR(B) deposits have emerged as a cushion, with inflows reaching about $65 billion through August 21 and expected to rise further in coming months. Sustained capital inflows remain critical amid uncertainty around crude oil prices, the US interest-rate cycle and developments in West Asia.
Corporate earnings have reinforced India's appeal. Nifty-50 companies reported adjusted net profit growth of 17.7% year-on-year in the June quarter, well ahead of Kotak Institutional Equities' expectation of 10.4%. The beat was led by stronger-than-expected performances from Reliance Industries, SBI and Hindalco.
Turakhia said Indian markets had lagged global technology-driven rallies earlier as investors preferred markets such as Korea and Taiwan. With valuations in several AI-linked stocks becoming stretched, global investors are increasingly looking elsewhere.
"A lot of these foreign investors are looking at something to move out of the AI trade and go to a place which is anti-AI trade, which is where India comes into play," Turakhia said.
Prashant Shah of Definedge pointed to improving earnings, broader market participation and renewed momentum in mid-cap, small-cap and micro-cap stocks after an extended period of consolidation.
"From that perspective I would see they would like to now increase their allocation and they would like to participate," said Shah.
Much of the recent foreign investment is coming through the primary market rather than aggressive secondary-market buying. Of the ₹23,543.99 crore of net FPI equity inflows through August 21, ₹9,426 crore came through the primary market and others category, while ₹14,117 crore flowed through stock exchanges.
With more than 50 IPOs launched in 2026 and a robust issuance pipeline ahead, foreign investors are expected to continue deploying capital through new listings. Large offerings from the National Stock Exchange and Reliance Jio later this year are likely to attract significant overseas interest.
"Direct FII buying in the secondary market might not be that huge, but they will definitely come in via these primary issuances," Shah said.
The cumulative equity outflow for 2026 remains at ₹2.31 lakh crore, but the trend has reversed. The July and August data mark the first sustained net buying after six months of selling.
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