FIIs Turn Net Buyers; Fresh Optimism in Indian Equities

After several months of persistent selling, foreign institutional investors (FIIs) have once again started showing renewed interest in Indian equities, signalling a possible shift in sentiment towards domestic markets.

According to NSDL data, between October 7 and October 14, FIIs were net buyers in five of the last seven sessions, purchasing more than Rs. 3,000 crore in the secondary market. Their participation in the primary market was even stronger at over Rs. 7,600 crore.
Provisional data from the NSE indicates that FIIs added another Rs. 162 crore on October 15, extending the buying trend.

Benchmark Rally Mirrors Renewed Flows

This return of foreign inflows has coincided with a steady uptrend in equity benchmarks. Since the start of October, both the Sensex and Nifty have gained about 3%, while the BSE Midcap index rose 3.4% and the Smallcap index advanced 1.7%, reflecting broad-based participation.

Market experts suggest that the renewed buying interest could be driven by improving corporate earnings, stabilizing macroeconomic conditions, and attractive valuations following months of correction.

Sharp Contrast to Earlier Outflows

The latest inflows mark a sharp turnaround from the heavy selling earlier in 2025, when FIIs had pulled out more than Rs. 2 lakh crore from the secondary market between January and September.
This came despite multiple growth-supportive steps such as GST rate cuts, a repo rate reduction in June, and India’s sovereign rating upgrade by S&P.

During that phase, Indian equities underperformed global peers — the Sensex and Nifty gained only 3%, while Midcap and Smallcap indices slipped 3% and 4%, respectively.

Outlook: Flows May Strengthen Ahead

Analysts believe the second half of FY2026 could see stronger FII inflows, supported by easing inflation, favorable valuations, and policy stability.
At around 20 times FY26 earnings, the Nifty is seen as reasonably valued compared to global markets.

Market sentiment is further supported by hopes of a potential India–US trade deal, growing US–China tensions, and expectations of a US Fed rate cut later this month, which could channel additional liquidity into emerging markets and commodities.

Chanakya View:
The FII turnaround adds strength to the ongoing market rally. Sustained foreign inflows, along with improving corporate performance, could help extend the uptrend in frontline and midcap stocks through the festive quarter.