Foreign portfolio investors returned to Indian equities in July and August 2026, improving liquidity and sentiment after a difficult first half.
The flow data
NSDL-linked data showed roughly ₹27,186 crore of equity inflows through August 25, including about ₹15,491 crore through exchanges and ₹11,694 crore through primary-market and other routes. August was the strongest month since September 2024. Yet foreign investors remained net sellers by about ₹2.27 lakh crore for calendar 2026 at that point.
Sector selection matters
The return was not a uniform purchase of the index. First-half August estimates showed financial services and automobiles attracting capital while telecom, capital goods, power and real estate saw outflows. Broad claims that FIIs were aggressively buying every cyclical sector therefore overstate the evidence.
Why flows changed
India’s growth data, improved earnings breadth, currency expectations and relative valuations all influence allocation. US yields and global risk appetite remain equally important because investors compare India with other equity and bond markets.
FII versus DII is not a scoreboard
Domestic mutual-fund and insurance flows can cushion foreign selling, but neither group is automatically correct. Prices respond to the interaction between flows, earnings expectations and available supply.
The bottom line: August was an important liquidity improvement, but confirmation requires sustained exchange buying, broader sector participation and continued earnings delivery.
Data references: NSDL FPI statistics through August 2026; exchange flow data; company and sector ownership disclosures.