Foreign portfolio investors (FPIs) have invested Rs 30,919 crore in Indian markets in August, marking the second consecutive month of net inflows. This follows a significant investment of Rs 20,200 crore in July, suggesting a potential reversal after a prolonged period of heavy selling.
In the preceding months, FPIs had withdrawn substantial amounts, including Rs 49,340 crore in June, Rs 32,963 crore in May, Rs 60,847 crore in April, and a massive Rs 1.17 lakh crore in March. Prior to this selling streak, FPIs had invested Rs 22,615 crore in February, according to CDSL data. Despite the recent inflows, foreign investors remain net sellers in Indian equities for 2026, with total withdrawals amounting to Rs 2.23 lakh crore so far, surpassing the Rs 1.66 lakh crore outflow recorded in 2025.
The recent inflows have been driven by several factors, including the reversal of the chip trade, stability in the rupee, and improving earnings growth in India. The continuation of foreign buying in August was supported by improving domestic fundamentals and a relatively favorable global backdrop. Corporate earnings showed signs of improvement during the June quarter, easing concerns around the earnings slowdown that had previously weighed on foreign investor sentiment.
“The important factors driving the FPI flows into India are the reversal of the chip trade, the stability in the rupee and, more importantly, the improving earnings growth in India.”
V K Vijayakumar, Chief Investment Strategist, Geojit Investments
Global factors also contributed positively, with easing geopolitical concerns and expectations of softer US interest rates. A rotation of global capital away from the crowded AI and semiconductor trade in markets such as Korea and Taiwan created room for incremental allocations towards India. However, tensions in West Asia and uncertainty over crude oil prices remain concerns for investors.
Foreign investor interest also extended to the debt market, with investments of Rs 627 crore through the Fully Accessible Route (FAR) and Rs 289 crore through the Voluntary Retention Route (VRR), although Rs 2,318 crore was pulled out through the general route.
“Corporate earnings showed signs of improvement during the June quarter, helping ease concerns around the earnings slowdown that had weighed on foreign investor sentiment earlier.”
Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India
Background
The recent inflows mark a significant change after a six-month period of heavy selling by FPIs, which saw withdrawals totaling Rs 2.23 lakh crore so far in 2026. This shift is crucial as it may indicate renewed confidence in the Indian market amid improving domestic and global conditions.
Looking ahead, investors will closely monitor movements in Brent crude prices and developments surrounding US-Iran tensions. Escalating US-Canada trade tensions could further add to market uncertainty. Elevated US bond yields also remain a key concern, with markets awaiting upcoming inflation data ahead of the Federal Reserve's policy meeting in mid-September.
