Total FPI flows across equity, debt, hybrid instruments, mutual funds and alternative investment funds turned positive in July at ₹40,031 crore and remained positive at ₹20,802 crore so far in August
After months of relentless selling, foreign portfolio investors (FPIs) are returning to Indian equities, supported by improving earnings, greater currency stability and the relative resilience of domestic markets. While flows remain selective, the recent turnaround suggests foreign investors are beginning to rebuild exposure to India after a prolonged period of risk reduction.
FPIs were net sellers of ₹2.74 lakh crore in Indian equities between January and June 2026. The tide started turning in July, when they bought equities worth ₹20,200 crore, followed by another ₹23,544 crore of net purchases in August through August 21. Although cumulative equity flows for 2026 remain negative at ₹2.31 lakh crore, the recent reversal indicates a meaningful shift in sentiment.
The broader picture also points to improving confidence. Total FPI flows across equity, debt, hybrid instruments, mutual funds and alternative investment funds turned positive in July at ₹40,031 crore and remained positive at ₹20,802 crore so far in August. While cumulative flows for the year are still negative, investors and market participants believe the worst of the selling cycle is behind.
A key factor underpinning the renewed interest is currency stability. With the rupee trading around the ₹95-97 per dollar, foreign investors are increasingly focused on stability rather than a specific exchange rate level.
Rupee Support
Vishad Turakhia, Managing Director and CEO of Equirus Securities, said, “What they would want is stability. It should not keep on depreciating.”
He added that currency stability, earnings, valuations and changing global investment preferences were collectively improving the case for India.
Support for the rupee is also coming from foreign currency inflows. FCNR(B) deposits have emerged as an important cushion, with inflows reaching about $65 billion through August 21 and expected to rise further in the coming months. Sustained capital inflows remain critical amid uncertainty around crude oil prices, the US interest-rate cycle and developments in West Asia.
Strong corporate earnings have also reinforced India’s appeal after months of sustained foreign selling. Nifty-50 companies reported adjusted net profit growth of 17.7 per cent year-on-year in the June quarter, significantly ahead of Kotak Institutional Equities (KIE) expectations of 10.4 per cent, led by stronger-than-expected performances from Reliance Industries, SBI and Hindalco. The earnings beat has strengthened confidence in India’s growth outlook and provided an additional trigger for foreign investors to increase allocations.
Anti-AI Trade
Turakhia said Indian markets had lagged global technology-driven rallies earlier as investors preferred markets such as Korea and Taiwan. However, 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.
The underlying strength of the market is also encouraging foreign participation. 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.
New Listing
Importantly, 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 recorded 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 (NSE) 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.
Published on August 23, 2026
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