FPI inflows top Rs 15,000 crore in July; more money may be on the way, largecaps in focus

Foreign portfolio investors (FPIs) have infused more than Rs 15,000 crore into Indian equities so far in July and, if analysts are to be believed, the trend may only gather pace as global investors look to diversify away from the crowded, growth-led AI trade in search of value opportunities.

Data compiled from NSDL suggests FPIs have infused Rs 15,157 crore into domestic equities in June so far against outflows of Rs 49,340 crore in June, Rs 32,963 crore in May, Rs 60,847 crore in April and a massive Rs 1,17,775 crore in March.

In the past, global investors used India as a funding market, selling a record $30 billion of Indian equities in a short span of three-and-a-half months, only to turn net buyers since mid-June. 

"With large underweight positioning towards Indian equities, global funds have ample room to neutralize their exposure. While a continued earnings downgrade cycle and still less attractive growth-valuation mix relative to other markets will be key investor concerns, improving visibility on domestic recovery will act as a catalyst for investors to start pricing in the anticipated recovery in advance," Goldman Sachs said.

It believes foreign outflows may reverse course through H2 and most sold and reasonably valued pockets like largecaps and banks stand to gain the most.

"The weakness in the chip trade in South Korea is turning out to be positive for India. FPIs are reducing the concentration risk in chip stocks despite their attractive valuations and moving money to stabler markets, where there is no concentration risk and long-term growth prospects are bright. If this trend sustains, Indian market will continue to remain resilient," said  VK Vijayakumar, Chief Investment Strategist at Geojit Investments.  

FPIs had turned negative on India since October 2024, with outflows intensifying sharply following the onset of the West Asia conflict in February, contributing to a market correction of almost 15 per cent from the peak. 

Due to this FII holdings in the NIfty500 index fell to a record low of 17.1 per cent in the March 2026 quarter, down 180 bps YoY and 110 bps QoQ.

In contrast, strong domestic inflows continued to provide market support, with DII ownership in the Nifty-500 universe rising to an all-time high of 20.9 per cent in March 2026, up 170 bps YoY and 50 bps QoQ. 

"While FII flows remained highly sensitive to the external triggers, easing geopolitical risks, lower crude oil prices, improving corporate earnings, and sharp valuation corrections from CY24 highs, along with India's valuation
premium to other EMs at historic lows, leave fewer reasons for FIIs to remain net sellers for long," MOFSL said.

Goldman Sachs said foreign ownership in largecaps has dropped to decade-low levels in Q1, while remaining stable in midcaps, suggesting largecaps faced the largest foreign selling pressure. As foreign sentiment improves ahead, it could see some rotation back into largecap stocks.