Foreign investors returned to Indian equities in August with a stronger buying pace, putting Rs 30,919 crore into the market and extending their net purchases for the second month. The latest inflow came after Rs 20,200 crore was invested in July, offering a marked change from the aggressive selling through the first half of the year.FPIs had withdrawn Rs 49,340 crore in June, Rs 32,963 crore in May, Rs 60,847 crore in April and Rs 1.17 lakh crore in March. Before that, foreign investors had put Rs 22,615 crore into Indian equities in February, according to CDSL data.The two consecutive months of inflows have come after what was the worst six-month stretch in years and could be an early sign that foreign investor flows are beginning to change direction. Yet, the overall picture for 2026 remains negative, with FPIs having taken out Rs 2.23 lakh crore from Indian equities so far. The figure has already surpassed the Rs 1.66 lakh crore withdrawn during the whole of 2025.“The important factors driving the FPI flows into India are the reversal of the chip trade, the stability in the rupee and, more importantly, the improving earnings growth in India,” V K Vijayakumar, chief investment strategist, Geojit Investments, said.Improvement in corporate performance during the June quarter helped strengthen investor confidence, alongside continued economic activity and higher credit growth.“Corporate earnings showed signs of improvement during the June quarter, helping ease concerns around the earnings slowdown that had weighed on foreign investor sentiment earlier. Resilient economic activity and strengthening credit growth also reinforced confidence in India’s medium- to long-term growth prospects,” Himanshu Srivastava, principal, manager research, Morningstar Investment Research India, said.The global backdrop was also more supportive at times during August. A reduction in geopolitical concerns improved risk appetite, while expectations of lower US interest rates supported the case for emerging-market allocations. The rotation of global money away from the heavily crowded AI and semiconductor trade in Korea and Taiwan also created scope for additional investment in India, Srivastava added.Foreign flows still faced risks, with Middle East tensions and uncertainty over crude oil prices weighing down sentiment.“Cash flows suggest returning conviction; futures suggest lingering caution. The trend may be turning, post AI and war-related worries receding,” Manish Bhandari, CEO and portfolio manager, Vallum Capital, said.The direction of crude oil prices and developments in US-Iran tensions will be among the key factors watched by investors in the coming period. Any escalation in US-Canada trade tensions could increase uncertainty in financial markets and prompt investors to remain cautious, Pabitro Mukherjee, Deputy Vice President-Research, Bajaj Broking, said.US bond yields are another concern. Investors are also awaiting inflation data before the Federal Reserve’s policy meeting in mid-September.For India, Q1 GDP growth and inflation readings will be important indicators for institutional flows, Mukherjee added.Foreign investors also made selective investments in the debt market during the month. They put Rs 627 crore through the Fully Accessible Route (FAR) and another Rs 289 crore through the Voluntary Retention Route (VRR). At the same time, they withdrew Rs 2,318 crore through the general route.
