Foreign Investors Came Back to Indian Stocks After Four Months of Selling

For four straight months, foreign portfolio investors (FPIs) had been pulling money out of Indian stocks. In July 2026, that changed. FPIs turned net buyers again, putting a net ₹20,200 crore into Indian equities according to NSDL data: about ₹6,731 crore through purchases on the stock exchanges and another ₹13,467 crore through the primary market, mainly IPOs and share sales.

The months before

The turnaround stands out because of how heavy the selling had been. After a brief burst of buying in February (₹22,615 crore), foreign investors pulled ₹1,17,775 crore out in March, ₹60,847 crore in April, ₹32,963 crore in May, and ₹49,340 crore in June. Even after July's inflow, they remain net sellers of Indian equities by about ₹2.54 lakh crore for calendar 2026 so far. July is a dent in that number, not a reversal of it.

Why foreign money came back

VK Vijayakumar, chief investment strategist at Geojit Investments, described the inflows as a "shift in global capital allocation" rather than a short-term trade. He pointed to volatility in South Korea and Taiwan and the concentration risk in the global "chip trade," which has pushed some foreign money towards steadier markets like India. He also cited a stable rupee, reasonable valuations among large-cap stocks, and the growth potential of mid- and small-cap companies, which he called the main reason FPIs have been raising their allocation to those segments.

The sectors attracting that money have shifted too. According to a Motilal Oswal report, FPIs have recently increased their allocations to private financials, capital goods, logistics, and real estate, while their appetite for technology stocks has cooled.

Indian investors have been holding the market up

The bigger story of 2026 is domestic money. Domestic institutional investors (DIIs), such as mutual funds and insurers, put ₹35,099 crore into Indian stocks in July alone, extending their buying streak to 36 consecutive months, and have invested more than ₹5 lakh crore in 2026 so far. Much of that is driven by ordinary savers: steady monthly SIP contributions into mutual funds have been soaking up the shares foreign investors sold.

That shift shows up in who owns Indian companies. DII ownership of Nifty 500 companies reached a record 21% in June 2026, the ninth straight quarterly increase, while foreign ownership fell to a record low of 17%. DIIs raised their holdings in 19 of 24 sectors over the past year, while FPIs cut exposure in 19.

What to watch

One month of buying doesn't prove a trend. Foreign flows are sensitive to global interest rates, the dollar, and geopolitical shocks, and they can reverse quickly. But after four months of steady outflows, foreign investors choosing to buy into India again is a signal markets watch closely, and with domestic investors already providing a strong floor, a sustained return of foreign money would add fuel rather than being the only thing holding prices up.