Foreign Portfolio Investors Increase Indian Equity Purchases in August
FIIs and DIIs maintain buying momentum amidst a surge in IPO and OFS issuances, while regional flows diverge across Asia.
Quick Look
Foreign portfolio and domestic institutional investors continued buying Indian equities through July and August, supported by strong primary market issuances, while broader Asian flows shifted between Taiwan and South Korea.
AI-generated summary
Why It Matters
Foreign portfolio investors turned buyers in July after four months of continuous selling in Indian markets.
Mumbai: Foreign portfolio investors (FIIs) moderately stepped up purchases of Indian equities in August after turning buyers in July following four months of selling, while domestic institutional investors (DIIs) continued to buy, though at a slower pace.
FIIs recorded net purchases of around $2.45 billion in July and $2.7 billion in August so far. DIIs bought around $3.65 billion in July and $4.6 billion in August so far, though their buying during the two months was around 50% below their average monthly investment over the previous six months, according to ET calculations.
Foreign portfolio investors continue buying, selectively adding to their July bets in August
Rajesh Palvia, head of research at Axis Securities, said the recent FPI buying has been selective and partly driven by opportunities in stake-sale transactions such as offers for sale (OFS), qualified institutional placements (QIPs) and other block deals.
Indian markets saw combined IPO, QIP and OFS issuances of over ₹1.15 lakh crore during July and August as promoters and early-stage private equity sold some of their stakes through block and bulk deals.
FPI buying in July and August followed four months of selling, even as foreign flows into some other Asian markets weakened. For much of CY26, Taiwan and South Korea had attracted strong foreign flows, supported by earnings momentum and the AI infrastructure trade.
The trend reversed in July, with Taiwan and South Korea seeing foreign outflows of $22.95 billion and $6.26 billion, respectively. South Korea recorded its third consecutive month of foreign selling. The trend has diverged in August so far, with Taiwan attracting $6.28 billion of foreign inflows. South Korea saw further outflows of $7.6 billion.
"I don't see this as sustained buying in India," Palvia said. "Foreign investors could turn sellers again once they deploy money into stocks offering better valuations, as geopolitical uncertainties remain."
DII flows, meanwhile, have slowed as fund managers turned cautious amid the lack of buying opportunities across the board. "Domestic fund managers are more selective about deployment at current valuations," said Sneha Poddar, VP-research, wealth management, Motilal Oswal Financial Services. "Domestic institutions had already front-loaded a large share of their buying this year, leaving less fresh capital to sustain the same monthly pace now that FIIs have turned buyers."
What to Watch
AI outlook — possibilities, not facts
Foreign investors could turn sellers again once they deploy money into better valuations.
Possible · Within months
Open Questions
- Will FII buying sustain given geopolitical uncertainties?
- How will upcoming valuations impact DII participation?
