Key Takeaways
- Foreign portfolio investors injected $3.1 billion into Indian equities in August, the highest monthly inflow in nearly two years.
- This surge was driven by strong earnings outlook and the Reserve Bank of India’s measures to stabilize the rupee.
- Despite this, foreign investors remain on course for the highest-ever annual outflows from the country.
Foreign portfolio investors (FPIs) poured $3.1 billion into Indian equities in August, marking the highest monthly inflow in nearly two years, according to National Securities Depository data.
This influx was bolstered by positive earnings reports and the Reserve Bank of India’s efforts to stabilize the rupee, which attracted foreign investment into the debt markets.
However, concerns about rising oil prices and India’s status as the world’s third-largest crude importer have dampened some of the enthusiasm, as foreign investors continue to shift towards markets with pure-play artificial intelligence (AI) companies such as Taiwan and South Korea.
Despite the positive trend, the broader market performance has been weak, with the Nifty and Sensex down 7.8% and 9.7% in 2026 respectively, among the worst-performing Asian and emerging markets.
The trend, however, has reversed since July, as worries about the profitability of AI investments have subsided.
Hiren Dasani, chief investment officer for emerging markets at Singapore-based WhiteOak Capital, noted that the key takeaway is the continued healthy demand for Indian equities, which has surpassed expectations and is continuing beyond the June quarter.
The Reserve Bank of India’s measures to support the rupee and attract foreign money into debt markets have also contributed to the positive sentiment, with profit after tax for Nifty 50 companies rising by the highest in 10 quarters, according to brokerages such as Motilal Oswal and PhillipCapital.
Several brokerages have since upgraded their fiscal year 2027 earnings expectations, reflecting the robust earnings season.
While foreign buying has increased, weakness in heavyweights such as HDFC Bank and Reliance Industries has dragged the Nifty and Sensex down 1.2% and 1.5% in August.
The broader markets, however, have fared better, with nine of 16 major sectors posting monthly gains and the small-cap and mid-cap indexes rising 3.1% and 2.1%, respectively, to record highs.
The key takeaway for domestic and foreign investors is that demand remains healthy, has beaten expectations and is continuing beyond the June quarter.
Hiren Dasani, Chief Investment Officer for Emerging Markets at WhiteOak Capital
