Rurash Financials Private Limited | Unlisted Equity Investments in India, Leading Stock Brokers and Stock Dealers in India

After months of relentless selling, foreign institutional investors (FIIs) appear to be rediscovering their appetite for Indian equities, signaling a possible shift in sentiment towards domestic markets.

Data from NSDL shows that between October 7 and October 14, FIIs turned net buyers in five of the last seven sessions, purchasing over Rs 3,000 crore in the secondary market. Their participation in the primary market was even stronger, exceeding Rs 7,600 crore. Provisional figures from the NSE suggest that FIIs added another Rs 162 crore on October 15.

The renewed buying has coincided with a steady uptrend in benchmark indices. Since the beginning of October, both the Sensex and Nifty have risen around 3 percent, while the BSE MidCap index has climbed 3.4 percent and the SmallCap index has advanced 1.7 percent.

The sudden reversal in foreign flows has caught many market watchers by surprise. While some view this as a short-term rebound, others attribute it to improving corporate earnings prospects and stabilizing macroeconomic conditions.

The latest inflows mark a sharp contrast to the heavy outflows seen earlier this year. From January to September 2025, FIIs sold more than Rs 2 lakh crore in the secondary market, even as the Reserve Bank of India and the government implemented a series of growth-supportive measures, including GST rate cuts, a steep repo rate reduction in June, and an upgrade in India’s sovereign rating by S&P.

During this period, Indian equities underperformed global peers, with the Sensex and Nifty rising just 3 percent, while the MidCap and SmallCap indices fell 3 percent and 4 percent respectively.

“They have already sold significantly, and the recent buying in secondary markets reflects improving earnings visibility and better economic parameters,” said Deven Choksey of DRChoksey FinServ.

“We expect a stronger second half of the fiscal year, with valuations now looking attractive. The Nifty, at around 20 times earnings, has meaningfully corrected from its highs.”

Market sentiment is also being lifted by optimism around a potential India–US trade deal amid escalating US–China tensions. Hopes of an interest rate cut by the US Federal Reserve later this month could further boost liquidity flows into emerging markets and commodities.

Experts point out that the combination of a weaker rupee, relatively subdued domestic market performance, and expectations of double-digit earnings growth for the Nifty50 in the second half of FY26 makes India an appealing long-term destination for foreign investors.

“Investors are hopeful of a positive outcome on the India–US trade agreement within the next 30 to 60 days, which could remove a key overhang,” said Sunny Agrawal of SBI Securities. “However, whether these inflows sustain or turn volatile remains to be seen.”

Some analysts remain cautious, warning that similar bouts of buying in the past have often been followed by renewed selling.

“Valuations have become more competitive compared to other emerging markets, and government stimulus along with encouraging Q2 results have reignited interest,” said Vinayak Magotra, Product Head and Founding Team Member at Centricity WealthTech.

“That said, heavy short positions in derivatives and instances of fresh selling suggest lingering caution. It’s prudent to stay patient and wait for a clear, sustained trend before calling it a full-fledged FII comeback.”