After offloading Indian equities at record pace and value, foreign institutional investors (FIIs) are showing signs of returning to the domestic market as a host of cues turn favourable. From reports of India considering removing long-term capital gains for foreign investors to a sell-off in global AI-linked stocks, FIIs have ramped up buying in domestic equities in recent sessions.
FIIs bought (net purchase) shares worth over Rs 10,000 crore in the first two sessions of this week and then again poured Rs 6,860 crore on Wednesday. The aggressive purchase comes after they turned net buyers of Rs 6,300 crore last week, snapping a ten-week selling streak. The infusion has helped the market to hit 2 month high level with benchmarks Sensex and Nifty recording five straight sessions of gains.
Analysts, however, feel that this should be seen more as a relief rally than a turnaround given net FII equity outflows of nearly Rs 2.95 lakh crore through October 2026 are almost double 2025’s tally.
Akshat Garg, Head- Research & Product, Choice Wealth said that three things turned in India’s favour: Brent crude easing toward $100, a firmer rupee as the dollar softened after the US midterms, and relatively attractive large-cap valuations following a sharp correction. Importantly, the trigger is global repricing, not an Indian rate cut — the RBI in fact raised the repo rate to 5.50% in October.
“Whether the momentum sustains depends largely on factors outside India. Much of the capital that left chased the US-led AI and semiconductor trade; some returns only if that trade cools. For flows to turn durable, the rupee must stabilise, crude must stay soft, clarity must emerge on a US–India trade deal, and — above all — Indian corporate earnings must deliver upgrades. For now, this is welcome stabilisation, not yet a trend,” added Garg.
Brent crude prices continue to remain above $100 per barrel while the rupee closed 0.16% stronger at 94.78 against the dollar. The rupee has depreciated by roughly 5.1% to 7.0% against the U.S. dollar so far in calendar year 2026.
Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities said that FIIs appear to be gradually regaining interest in Indian equities after a prolonged phase of selling.
He added that it is too early to conclude that a sustained reversal in FII flows is underway. The continuation of foreign buying will depend on several macroeconomic factors, including the trajectory of crude oil prices, US bond yields, rupee stability and the strength of corporate earnings. Geopolitical developments and global risk sentiment will also play a crucial role, added Shah.
He stated, “A moderation in crude prices, easing global yields and a broad-based improvement in earnings could strengthen India's investment appeal and encourage sustained foreign inflows. For now, the renewed buying is an encouraging development, but confirmation of a durable FII comeback will require consistent inflows over the coming weeks.”
