FPIs return to Indian equities for second straight month
Foreign Portfolio Investors (FPIs) have accelerated their buying in Indian equities in August 2026, infusing ₹23,544 crore so far in the month. This follows a ₹20,200 crore investment in July, together marking a sharp turnaround after four consecutive months of net selling. The back-to-back inflows signal renewed confidence in Indian markets, supported by improving quarterly earnings, a stable rupee, and better market prospects, as reported across multiple outlets.
The August figures come from CDSL data, which also show that FPIs had withdrawn ₹49,340 crore in June, ₹32,963 crore in May, ₹60,847 crore in April, and a massive ₹1.17 lakh crore in March. Prior to that selling streak, foreign investors had invested ₹22,615 crore in February.
Despite the recent buying, FPIs remain net sellers in Indian equities for 2026 overall, withdrawing around ₹2.3 lakh crore, which already exceeds the ₹1.66 lakh crore outflow recorded during the whole of 2025.
Strategic rationale: earnings and currency stability
According to V K Vijayakumar, Chief Investment Strategist at Geojit Investments, the factors driving FPIs back are a revival in earnings growth, as reflected in Q1 results, an FPI withdrawal from the "chip trade," rupee stability, and the impressive growth prospects of broader-market companies.
"The factors that are driving the FPIs back to the Indian market are: earnings growth revival as reflected in Q1 results, FPI withdrawal from the 'chip trade', rupee stability and the impressive growth prospects of companies in the broader market," he said.
Vijayakumar also noted that FPIs are not buying attractively valued leading large banking or IT stocks; instead, they are selectively purchasing mid-caps despite elevated valuations.
The Hindu Business Line adds context, reporting that FPIs were net sellers of ₹2.74 lakh crore in Indian equities between January and June 2026, and that the recent shift signals a meaningful change in sentiment. The rupee trading around ₹95-97 per dollar has helped, with Vishad Turakhia, Managing Director and CEO of Equirus Securities, saying foreign investors prefer currency stability over any specific exchange-rate level. "What they would want is stability. It should not keep on depreciating," he said, adding that currency stability, earnings, valuations, and changing global investment preferences were all improving the case for India.
Among the supporting factors for the rupee, FCNR(B) deposits have attracted about $65 billion through August 21, providing a cushion. Meanwhile, Nifty-50 companies reported a 17.7% year-on-year adjusted net profit growth in the June quarter, outperforming Kotak Institutional Equities' expectation of 10.4%, according to an analysis in The Hindu Business Line. The strong performance came from Reliance Industries, SBI, and Hindalco.
Primary markets as a channel for FPI inflows
The Hindu Business Line outlines that of the ₹23,543.99 crore of net FPI equity inflows in August up to August 21, ₹9,426 crore arrived through the primary market and other categories, while ₹14,117 crore came through stock exchanges. The Financial Times notes that 1 Indian market has seen more than 50 IPOs launched in 2026, with NSE and Reliance Jio expected to list large proposals later this year. Prashant Shah from Definedge said foreign investors want to increase their allocation and participate in these opportunities, likely to continue deploying capital through new listings.
Debt market flows
Alongside equities, FPIs have extended their interest to the debt market. They invested ₹852 crore through the Fully Accessible Route (FAR) and pulled out ₹995 crore through the general route during the period under review.
Market outlook for the coming week
Looking ahead, investors will monitor crude oil price movements and developments in the ongoing US-Iran geopolitical tensions for direction. According to Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking, these factors could influence the market in the forthcoming week.
As overall yearly flows remain negative, the recent two months of buying signal a potential stabilisation in foreign investor attitude, though broad-based reversal remains absent.