Will foreign inflows to Indian stock market sustain in coming months? What BofA says
BofA Global Research believes the combination of improving fundamentals and a more favourable market environment could support further foreign buying.
- Nov 12, 2026,
- Updated Nov 12, 2026 3:33 PM IST
Foreign inflows into Indian equities could remain strong in the coming months as improving corporate earnings, relatively attractive valuations and lighter investor positioning make the market more appealing to overseas funds, according to BofA Global Research.
"Overseas investors have begun reducing their underweight positions in Indian equities following an extended period of selling, while long-only funds are also starting to increase their allocations to the country," Bloomberg quoted BofA's head of India research Amish Shah as saying in a note.
The research house believes the combination of improving fundamentals and a more favourable market environment could support further foreign buying.
BofA's more constructive stance on Indian equities dates back to mid-September, when Shah and his colleagues turned positive on the benchmark NSE Nifty 50 after maintaining a cautious outlook for nearly two years. According to Bloomberg, the brokerage's assessment was that much of the risk facing the Indian market had already been reflected in stock valuations.
Foreign investors return to Indian equities
The shift in sentiment is already visible in overseas investment flows. Foreign funds purchased a net $6 billion worth of Indian shares between November 1 and November 9, according to data compiled by Bloomberg. The buying has put overseas investors on course for their strongest monthly net purchases since 2023, Bloomberg reported.
The Nifty 50 has also recovered significantly, rising nearly 14% since touching an 18-month low on October 8. The market rebound, alongside the improvement in foreign flows, points to a change in investor sentiment after a prolonged period of caution.
Shah told Bloomberg that the conditions for a recovery in investor confidence were already in place, but markets needed a trigger to turn more optimistic. He said, "The setup was already there. You just needed a nudge for investors to turn optimistic."
What is driving the change in sentiment?
According to Shah, several developments have helped improve the outlook for Indian equities. These include growing questions around the global artificial intelligence (AI) investment theme, easing geopolitical tensions between the US and Iran, and a decline in crude oil prices.
The combination of these factors has helped investors reassess the risks facing the Indian market. Lower crude prices, in particular, could offer some relief to India's external balances and inflation outlook, while improving earnings and more reasonable valuations are adding to the market's appeal.
BofA's view suggests that overseas investors who had reduced their exposure to Indian stocks are beginning to reconsider their positions. With long-only funds also showing signs of renewed interest, foreign investment flows could remain an important driver of the domestic equity market in the near term.
Foreign inflows into Indian equities could remain strong in the coming months as improving corporate earnings, relatively attractive valuations and lighter investor positioning make the market more appealing to overseas funds, according to BofA Global Research.
"Overseas investors have begun reducing their underweight positions in Indian equities following an extended period of selling, while long-only funds are also starting to increase their allocations to the country," Bloomberg quoted BofA's head of India research Amish Shah as saying in a note.
The research house believes the combination of improving fundamentals and a more favourable market environment could support further foreign buying.
BofA's more constructive stance on Indian equities dates back to mid-September, when Shah and his colleagues turned positive on the benchmark NSE Nifty 50 after maintaining a cautious outlook for nearly two years. According to Bloomberg, the brokerage's assessment was that much of the risk facing the Indian market had already been reflected in stock valuations.
Foreign investors return to Indian equities
The shift in sentiment is already visible in overseas investment flows. Foreign funds purchased a net $6 billion worth of Indian shares between November 1 and November 9, according to data compiled by Bloomberg. The buying has put overseas investors on course for their strongest monthly net purchases since 2023, Bloomberg reported.
The Nifty 50 has also recovered significantly, rising nearly 14% since touching an 18-month low on October 8. The market rebound, alongside the improvement in foreign flows, points to a change in investor sentiment after a prolonged period of caution.
Shah told Bloomberg that the conditions for a recovery in investor confidence were already in place, but markets needed a trigger to turn more optimistic. He said, "The setup was already there. You just needed a nudge for investors to turn optimistic."
What is driving the change in sentiment?
According to Shah, several developments have helped improve the outlook for Indian equities. These include growing questions around the global artificial intelligence (AI) investment theme, easing geopolitical tensions between the US and Iran, and a decline in crude oil prices.
The combination of these factors has helped investors reassess the risks facing the Indian market. Lower crude prices, in particular, could offer some relief to India's external balances and inflation outlook, while improving earnings and more reasonable valuations are adding to the market's appeal.
BofA's view suggests that overseas investors who had reduced their exposure to Indian stocks are beginning to reconsider their positions. With long-only funds also showing signs of renewed interest, foreign investment flows could remain an important driver of the domestic equity market in the near term.