Foreign Institutional Investors (FIIs) recorded their strongest monthly investment in Indian equities in nearly two years, buying stocks worth ₹29,631 crore in August 2026, according to data from the National Securities Depository.
The August inflow was the highest since September 2024 and marked the second consecutive month of foreign buying after a prolonged four-month selling streak. FIIs had invested ₹20,200 crore in Indian equities in July, helping reverse a part of the ₹49,340 crore outflow witnessed in June.
With the combined inflows in July and August, foreign investors have pumped ₹49,831 crore into Indian stocks, almost offsetting the previous month’s withdrawal.
Earnings recovery and rupee stability boost investor confidence
Improving market sentiment was supported by several factors, including measures taken by the Reserve Bank of India to support the rupee and attract foreign capital. Strong corporate earnings growth during the June quarter also encouraged overseas investors.
Profit after tax growth among Nifty 50 companies reached its strongest level in 10 quarters, prompting brokerages such as Motilal Oswal and PhillipCapital to raise their earnings forecasts for FY27.
Market experts said foreign investors have increasingly focused on mid-cap and small-cap stocks due to stronger earnings potential compared with large-cap companies.
Debt inflows weaken despite positive overall foreign flows
While equity markets saw strong foreign participation, the momentum in debt markets slowed during August. FIIs sold ₹2,224 crore worth of general limit debt securities during the month.
Investment in government securities under the Fully Accessible Route also declined sharply. Foreign investment in FAR bonds fell to ₹264 crore in August from ₹21,652 crore in June.
Despite weaker debt market participation, overall FII flows remained positive for the third consecutive month. Net foreign inflows stood at ₹25,492 crore in August compared with ₹40,031 crore in July.
Earlier, FIIs had reduced exposure to Indian stocks due to concerns over high valuations. However, analysts said sustained demand, improving earnings growth and stable currency conditions have helped revive foreign investor interest.
