FPIs Buy Indian Equities Again; DIIs Slow Down

Foreign portfolio investors (FPIs) moderately increased their purchases of Indian equities in August, extending a buying trend initiated in July following four consecutive months of net selling. Simultaneously, domestic institutional investors (DIIs) maintained their buying activity, though at a notably slower velocity.

FPI Inflows Continue, DIIs Slow

DII investments in July and August registered approximately 50% lower than their average monthly investment over the preceding six months. Rajesh Palvia, head of research at Axis Securities, indicated that the recent FPI buying has been selective, partially driven by stake-sale transactions such as offers for sale (OFS), qualified institutional placements (QIPs), and other block deals.

• Combined IPO, QIP, and OFS issuances exceeded ₹1.15 lakh crore during July and August.

This capital influx occurred as promoters and early-stage private equity firms divested some of their holdings, providing opportunities for foreign participation.

Asian Markets Diverge

India’s FPI buying contrasted with weaker foreign flows observed in other key Asian markets. Taiwan and South Korea, which had attracted strong foreign flows for much of 2026, driven by earnings momentum and the AI infrastructure trade, saw this trend reverse in July.

• July Taiwan outflows: $22.95 billion
• July South Korea outflows: $6.26 billion (marking its third consecutive month of foreign selling)
• August Taiwan inflows: $6.28 billion
• August South Korea outflows: $7.6 billion

Sustainability Concerns Emerge

Rajesh Palvia expressed skepticism regarding the sustainability of the current FPI buying trend in India. He suggested that foreign investors might revert to selling once more attractive valuation opportunities arise elsewhere, especially given ongoing geopolitical uncertainties.

Similarly, DII flows have decelerated as fund managers adopt a more cautious stance, citing a scarcity of broad buying opportunities. Sneha Poddar, VP-research, wealth management at Motilal Oswal Financial Services, noted that domestic fund managers are being more selective at current valuations, having already deployed a significant portion of their capital earlier in the year, which limits their capacity to maintain the same monthly buying pace now that FIIs have re-entered the market.