Foreign Portfolio Investors (FPIs) channeled 30,919 crore rupees into Indian stocks in August, extending their buying streak to the second consecutive month. This inflow followed investments of 20,200 crore rupees in July, marking a sharp reversal after four months of continuous heavy selling.
According to CDSL data, before this period, FPIs had invested 22,615 crore rupees in February. However, they had previously withdrawn funds: 49,340 crore rupees in June, 32,963 crore rupees in May, 60,847 crore rupees in April, and a substantial 1.17 trillion rupees in March. Two consecutive months of buying, following the toughest six-month period in recent years, offer the first hint of a potential trend change.
Nevertheless, in 2026, foreign investors remain net sellers in the Indian stock market, having withdrawn funds totaling 2.23 trillion rupees so far. This amount exceeds the 1.66 trillion rupees withdrawn throughout 2025.
V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that key factors driving FPI inflows into India are the recovery in chip trade, rupee stability, and more importantly, improved profit growth in India.
The continuation of foreign purchases in August was supported by improved domestic fundamentals and a relatively favorable global backdrop. Himanshu Srivastava, Chief Manager of Research at Morningstar Investment Research India, stated that company earnings showed signs of improvement in the June quarter, which helped alleviate concerns about profit slowdown that had previously affected foreign investor sentiment. Furthermore, stable economic activity and strengthening credit growth bolstered confidence in India's long-term growth prospects.
Global factors also provided relative support during part of the month. Reduced geopolitical tensions contributed to increased risk appetite, while expectations of interest rate easing in the US and the reallocation of global capital from oversupplied AI and semiconductor markets like Korea and Taiwan created space for additional investment in India, he added.
However, tensions in West Asia and uncertainty regarding crude oil prices continued to pose a risk factor. Manish Bhandari, CEO and Portfolio Manager at Vallum Capital, suggested that cash flows indicate a return of conviction, while futures suggest persistent caution, and that the trend may shift after easing concerns related to AI and the war.
Pabitro Mukherjee, Vice President of Research at Bajaj Broking, warned that investors will closely monitor Brent crude oil price movements and events concerning US-Iran tensions going forward. Escalation of trade tensions between the US and Canada could further heighten market uncertainty and maintain investor caution. High US bond yields also remain a significant concern as markets await inflation data before the Federal Reserve meeting in mid-September.
Domestically, key indicators for institutional flows will remain Q1 GDP growth data and inflation. Foreign investor interest has also extended to the debt market: they invested 627 crore rupees through the Fully Accessible Route (FAR) and 289 crore rupees through the Voluntary Retirement Route (VRR), but withdrew 2,318 crore rupees through the general route.
