FII Investments in Indian Equities Climb to Rs 29,631 Crore in August, Highest in 23 Months

FIIs returned to Indian equities in August 2026, making net purchases of Rs 29,631 crore. This was their largest monthly inflow in 23 months, according to National Securities Depository data.

August marked the second straight month of FII buying after four months of selling. The monthly inflow was the highest since September 2024.

FII buying began to turn around in July, with Rs 20,200 crore flowing into Indian stocks after the Rs 49,340 crore withdrawal in June. July and August together brought in Rs 49,831 crore, enough to offset the previous month’s outflow. It was the first two-month run of net foreign buying in Indian equities during 2026.

Sentiment improved as the Reserve Bank of India took measures to support the rupee and attract overseas capital into debt markets. A strong set of June-quarter earnings also helped.

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Nifty 50 companies posted their fastest growth in profit after tax in 10 quarters, according to at least five brokerages. Motilal Oswal and PhillipCapital subsequently lifted their earnings estimates for the financial year 2026-27.

The strong momentum seen in the debt market over the previous two months did not continue in August. FIIs sold general limit debt securities worth Rs 2,224 crore during the month.

Foreign investment in government securities available under the Fully Accessible Route also declined sharply. FII investments in FAR bonds fell to Rs 264 crore in August from Rs 21,652 crore in June.

Despite weaker debt inflows, total FII flows remained positive for a third consecutive month. Overall net inflows stood at Rs 25,492 crore in August, against Rs 40,031 crore in July.

V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said FPIs had purchased equities worth Rs 30,918 crore in August up to 29 August. Of this amount, Rs 18,790 crore came through exchanges and Rs 12,128 crore through the “primary market and others” category.

He identified the reversal of the chip trade, stability in the rupee and improving earnings growth in India as important factors behind the foreign flows. Vijayakumar also pointed to a recent shift in FPI investment towards SMIDs, or mid- and small-cap stocks, where growth and earnings momentum were higher than in large-cap companies.

FIIs had previously lowered their exposure to Indian equities as valuations appeared expensive in relation to corporate earnings. India’s price-to-earnings ratio was 23.88 times as of 31 July 2026, according to the MSCI Index factsheet.

Hiren Dasani, Chief Investment Officer for Emerging Markets at Singapore-based WhiteOak Capital, said demand remained healthy, had exceeded expectations and continued beyond the June quarter.

Dasani told Reuters that the RBI also appeared to have attracted sufficient foreign exchange inflows. He cited the early closure of a special dollar-rupee swap window for banks raising foreign currency deposits from the diaspora.