Rs 53,739 crore FPI inflows in Nov, highest since Sept 2024; why and what's next

Foreign inflows are back on the Indian stock market with a bang. After pulling out Rs 70,704 crore over the past two months, foreign portfolio investors (FPIs) have pumped in Rs 53,739 crore in November, the highest monthly inflow since September 2024, when the institutional category bought Rs 57,724 crore worth of Indian equities.

The sharp buying by FPIs coincides with emerging concerns in the US over trillion-dollar investment commitments in artificial intelligence (AI), as volatile oil prices are forcing the Federal Reserve and other central banks to raise interest rates, raising questions about whether such investments would eventually deliver satisfactory returns. Adding to this is the outcome of the US midterm elections, which has raised hopes of a halt to AI-led investments.

The fact that earnings momentum in India has gained traction, reports of the government looking into FPI concerns over capital gains taxes, and India's positioning as a 'reverse AI trade' with reasonable valuations have all aided FPI re-entry into the Indian market.

"We see India growth story to continue with financialization, consumption, digitization, healthcare, and government capex as the key pillars to this story. Domestic growth and corporate fundamentals remain important anchors," said Vinay Paharia, CIO at PGIM India Mutual Fund.

Despite November's strong inflows, FPI outflows for 2026 stand at a whopping Rs 2,41,406 crore, the highest for any year.

Paharia said there are near-term challenges in terms of geopolitics, crude and hardening interest rates, but the bulk of these has already been priced in. Large caps, in particular, bore the brunt of this reset and are more attractive at this juncture, he said.

"Easing of the above uncertainties, reversal of AI flows and inflows could be external triggers for markets," he said.

SBI Securities said the US midterm elections have delivered a decisive verdict against the policies pursued by the current administration, with markets taking a risk-on mode so far, amid hopes of significant legislative oversight over AI and data centre spending and, more importantly, the Iran war. This has resulted in a correction in AI-related stock themes and a pullback in oil prices, with a significant positive sentiment impact on rupee assets.

"Even as the outlook on FPI equity flows and thereby the currency improves at the margin, the stalemate on the Iran war continues with no definitive direction that can be assumed at this stage. Accordingly, the risk of a reversal in yields remains very much alive, more so as the domestic CPI inflation estimates are broadly based on the current crude prices," it noted.