FPIs reverse 4-month selling trend with Rs 15,157 cr inflow in Jul

Synopsis

In July, foreign investors turned net buyers of Indian equities following a period of large outflows, prompted by favorable domestic macroeconomic trends and improved global risk sentiment. The Indian debt market also saw a significant influx of foreign investments, attributed to recently modified debt taxation that enhanced its attractiveness. The continuity of these inflows is contingent upon both global developments and the pace of India's economic growth.

After four straight months of selling, foreign investors turned net buyers of Indian equities in July, investing over Rs 15,157 crore so far this month, supported by improving domestic macroeconomic indicators, a stable rupee and better global risk sentiment.

The latest inflow follows net outflows of 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, according to data from the Central Depository Services (India) Ltd (CDSL).

Prior to the selling spree, foreign portfolio investors (FPIs) had invested Rs 22,615 crore in Indian equities in February.

Despite July's turnaround, foreign investors have pulled out a net Rs 2.6 lakh crore from Indian equities so far in 2026, exceeding the Rs 1.66 lakh crore withdrawn in the same period of 2025.

According to Himanshu Srivastava, Principal Manager Research at Morningstar Investment Research India, the reversal in July reflects improving global risk appetite, easing concerns over energy prices following the de-escalation of geopolitical tensions earlier this month, and renewed confidence in India's macroeconomic fundamentals.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said improving domestic macroeconomic conditions and the rupee's stability have played a key role in attracting foreign inflows.

He added that weakness in the semiconductor trade and FPIs turning sellers in markets such as South Korea also redirected flows towards India.

Srivastava noted that after a period of market consolidation, valuations have become more reasonable, prompting foreign investors to selectively increase exposure to high-quality Indian firms.

He, however, cautioned that while July's sharp reversal is encouraging, the sustainability of FPI inflows will depend on global developments and the resilience of India's domestic growth story.

Meanwhile, debt continues to attract growing foreign interest. FPIs invested Rs 6,625 crore in debt securities through the Fully Accessible Route (FAR) and Rs 3,228 crore through the general route during July.

Vijayakumar said the government's changes to the taxation of debt investments have made Indian debt more attractive to FPIs while contributing to the rupee stability.

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