FII Inflows Surge to 23-Month High in Indian Equities
By Market Desk
Foreign Institutional Investors poured ₹29,631 Cr into Indian equities in August, marking a 23-month high and signaling renewed confidence in the market.
Foreign Institutional Investors (FIIs) injected ₹29,631 crore into Indian equities during August 2026, marking their highest monthly net inflow in 23 months. This substantial investment represents the first instance this calendar year where foreign investors have been net buyers for two consecutive months.
The combined FII equity inflows for July and August decisively reversed a significant outflow from June, demonstrating renewed foreign interest in the Indian market.
Key Equity Movements
- August 2026 FII net inflow: ₹29,631 crore
- July 2026 FII net inflow: ₹20,200 crore
- Combined July-August FII inflow: ₹49,831 crore
- June 2026 FII net outflow: ₹49,340 crore
V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, attributed the sustained Foreign Portfolio Investor (FPI) flows to several key economic and market factors.
Driving Factors for FPI Inflows
- Reversal of the chip trade
- Stability in the Indian rupee
- Improving earnings growth within India
Vijayakumar further highlighted a noticeable shift in FPI strategy, with increasing investment directed towards mid- and small-cap (SMID) companies. These segments are currently exhibiting higher growth and earnings momentum compared to their large-cap counterparts, a trend anticipated to persist.
Broader Market Dynamics
While equity inflows surged, the robust performance observed in debt markets during the preceding two months did not continue. FIIs transitioned to net sellers in General Limit debt securities during August.
- August FII net selling in General Limit debt: ₹2,224 crore
- August FII inflows into Fully Accessible Route (FAR) government securities: ₹264 crore
- June FII inflows into Fully Accessible Route (FAR) government securities: ₹21,652 crore
- Overall FII inflows August (across all segments): ₹25,492 crore
- Overall FII inflows July (across all segments): ₹40,031 crore
Historically, FIIs had reduced their exposure to Indian equities, citing elevated valuations. India’s price-to-earnings (P/E) ratio stood at 23.88 times as of July 31, 2026, indicating a premium.
This sentiment was reinforced by the MSCI India index’s underperformance against the MSCI Emerging Markets index in 2025, returning 9.49% compared to the latter’s 41.05% gain. Additionally, the narrowing spread of approximately 2.1–2.3 percentage points between US and Indian benchmark 10-year government bond yields in August 2026 diminished the relative appeal of Indian government securities, influencing broader asset allocation decisions by foreign investors.