FPIs turned net buyers in July, investing ₹15,412 crore after four months of heavy selling, supported by easing geopolitical tensions and improved global sentiment. However, overall FPI flows remain negative for 2026, and experts view the inflow as a tactical move rather than a long-term trend. Domestic investors have continued to support the market, though low DII cash levels remain a key risk.
Foreign portfolio investors (FPIs) reversed their four-month long period of being sellers of Indian stocks in July and became net buyers. FPIs invested an amount of ₹15,412 crore during July. Before this, FPIs withdrew ₹1.17 trillion in March, ₹60,847 crore in April, ₹32,963 crore in May, and ₹49,340 crore in June. These figures were released by National Securities Depository Ltd. (NSDL).
In spite of July investment by FPIs, there has been an overall negative investment by FPIs in India till now in 2026, withdrawing an amount of ₹2.59 trillion. The total withdrawal is more than ₹1.66 trillion withdrawn during the entire calendar year 2025. The current inflow of FPIs occurred on the back of easing of geopolitical tensions, fall in crude oil prices, and improvement in global risk sentiment. Yet, market observers see this as a tactical repositioning rather than a structural shift towards Indian equities.
Why FPIs Returned to Indian Markets
The FPI purchase made recently was due to the improved conditions globally with the cooling off of tensions between the US and Iran, as well as reduced crude oil prices. The global investors also began reducing their investments in the Asian AI-themed market, specifically South Korea and Taiwan.
FPIs had been taking long positions in the Asian AI theme but holding short positions in India. The foreign investors were taking nearly 90% net short positions in the index options for about 18 months. With the Asian AI theme in South Korea and Taiwan beginning to fade, there was a start of covering the short positions of the Indian large caps, thereby stopping further selling.
During July, FPIs sold shares worth $12.5 billion in South Korea and $23.4 billion in Taiwan.
Nonetheless, experts opine that continued FPI flows would be dependent on crude oil prices staying contained, the rupee staying stable, and improvement in Q1FY27 corporate earnings.
Check Out: Guide for Foreign Portfolio Investment
Primary Market Buying Continues Despite Secondary Market Selling
The other trend during the FPI selling was the disparity between the activity in the secondary and primary market. Whereas foreign investors took out over ₹2 trillion from the secondary market in 2026, they invested around ₹33,000 crore in the primary market.
It suggests that FPIs did not see India in entirely pessimistic light but became more selective because of the high valuations. The foreign investors were still participating in new issues that had better prospects for future and better valuations.
Previously, geopolitical uncertainty has hampered IPO activity, and companies have raised only ₹26,338 crore via main board and SME issues until June. However, the improved mood in July enabled companies to raise ₹29,235 crore alone in that month.
Why Stock Market Did Not Fall Despite FPI Selling
The Indian stock market exhibited resilience amid sustained withdrawals from FPIs. Sensex posted gains of 2.3% in June, despite substantial foreign selling pressure, while gaining 1.6% in July as FPIs became buyers.
FPIs have been net sellers for five out of the past six months, but still positive returns have been generated in months like April and June. This clearly indicates that domestic liquidity has made India less dependent on foreign funds.
Foreign shareholding among 4,500 firms decreased to 14.4% in the June quarter, the lowest in 14 years. Foreign holding dropped 160 basis points during the past year, while mutual fund holding increased 100 basis points to 11.5%.
Domestic Investors Provide Strong Support, But Liquidity Risks Remain
DIIs have been absorbing most of the selling pressure from foreign portfolio investors (FPIs) in 2026. While DIIs have invested in excess of ₹5 trillion so far this year, FPIs have pulled out ₹2.58 trillion from the markets. In July, DIIs invested around ₹35,000 crore.
Besides strong retail participation through monthly SIP investment of more than ₹25,000 crore and direct investments in equities of over ₹36,000 crore so far this year, the markets have seen support.
But the concern is that DIIs are currently working with the lowest cash levels in the past two years, which may make it difficult for them to absorb any kind of fresh wave of selling from the foreign segment.
The markets are expected to stay range-bound with important levels of 23,600-24,800 on the Nifty 50. Although domestic flows have helped in reducing the impact of FPIs, global capital flows, forex action, and earnings growth will continue to determine market direction.
