FPIs turn buyers for second month, invest ₹30,919 crore in August

Foreign portfolio investors (FPIs) injected ₹30,919 crore into Indian equity markets in August, continuing their buying spree for the second consecutive month. This marks a notable shift after a prolonged period of outflows, driven by improved economic conditions, stable currency values, and reduced geopolitical risks. The inflows follow ₹20,200 crore in July, reversing a steep decline that saw FPIs withdraw large sums over the previous four months. The recent inflows come after a severe sell-off that lasted six months, with FPIs pulling out ₹49,340 crore in June, ₹32,963 crore in May, ₹60,847 crore in April, and a record high of ₹1.17 lakh crore in March. Before this downturn, FPIs had invested ₹22,615 crore in February, according to data from the Central Depository Services (India) Ltd. (CDSL). This two-month buying streak suggests a potential reversal in the trend of capital flight from Indian equities. However, FPIs still remain net sellers for the year 2026, having withdrawn ₹2.23 lakh crore so far, surpassing the total outflow of ₹1.66 lakh crore recorded in 2025. Analysts point to several factors influencing the current inflow. V.K. Vijayakumar, chief investment strategist at Geojit Investments, highlighted the reversal of the chip trade, the stability of the rupee, and improving earnings growth in India as critical drivers. He noted that these elements have contributed significantly to renewed investor confidence. Domestic economic fundamentals have shown resilience, bolstered by stronger corporate earnings during the June quarter. This has alleviated concerns about a slowdown in earnings that previously deterred foreign investors. Additionally, robust economic activity and increasing credit growth have reinforced optimism regarding India’s long-term growth trajectory. Globally, the environment has become more favorable. Easing geopolitical tensions have improved risk appetite, while expectations of lower U.S. interest rates and a shift in capital away from saturated sectors like AI and semiconductors in regions such as South Korea and Taiwan have opened opportunities for investment in India. Despite these positive signals, challenges persist. Tensions in West Asia and uncertainties surrounding crude oil prices continue to cast a shadow over market sentiment. Analysts warn that while cash flows indicate growing confidence, futures contracts suggest some lingering caution among investors. Manish Bhandari, CEO and portfolio manager at Vallum Capital, observed that the trend might be shifting, with concerns related to artificial intelligence and conflicts receding. However, he emphasized the need to monitor developments closely. Looking forward, investors are keeping a close eye on movements in Brent crude prices and evolving dynamics in U.S.-Iran relations. Potential escalations in U.S.-Canada trade disputes could introduce additional volatility, prompting further caution among investors. Elevated U.S. bond yields also remain a concern, with markets anticipating upcoming inflation data before the Federal Reserve’s policy meeting in mid-September. Domestically, Q1 GDP growth figures and inflation data will serve as crucial indicators for institutional investment flows. These metrics will provide insights into the overall health of the economy and influence future investor decisions. In addition to equity investments, FPI interest has also expanded to the debt market. Investors allocated ₹627 crore via the Fully Accessible Route (FAR) and ₹289 crore through the Voluntary Retention Route (VRR). However, they withdrew ₹2,318 crore through the general route, indicating mixed sentiments across different segments of the financial market.