New Delhi, November 1: Foreign institutional investors (FIIs) are showing early signs of returning to Indian equity markets amid global uncertainty surrounding artificial intelligence (AI) stocks, attractive domestic valuations and improving economic growth prospects, according to market analysts.
Although experts believe it is too early to confirm a sustained reversal, recent buying activity suggests a possible shift in foreign investor sentiment.
FIIs Turn Buyers
During the four trading sessions ending October 30, FIIs emerged as net buyers in the cash market on three occasions.
This change in investment sentiment helped the benchmark Nifty index reclaim the 23,000 mark.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments, attributed the shift to the US Federal Reserve holding interest rates, attractive large-cap valuations and India’s improving economic fundamentals.
Strong Credit Growth
India’s credit growth has strengthened significantly, supporting expectations of sustained economic expansion.
Bank credit increased 19.1% year-on-year in September, while lending to industry grew 19.5%. Credit to the services sector expanded 28.3%.
Analysts believe improving industrial capital expenditure and weakening enthusiasm for AI-related investments globally could encourage foreign investors to reconsider Indian equities.
Sectoral Investment Shift
Despite continued selling in large-cap financial stocks, FIIs have been gradually accumulating shares in pharmaceuticals, healthcare and select digital platform companies.
This selective buying indicates that foreign investors are identifying opportunities in sectors offering relatively attractive valuations and growth prospects.
Record Foreign Outflows
Foreign investors have withdrawn approximately $59 billion from Indian equities over the 24 months ending September 2026.
Including October’s month-to-date selling, cumulative outflows increased to around $64 billion.
Rolling 12-month foreign outflows reached a record $40 billion in June 2026.
FIIs sold $14.9 billion in FY25, $21.9 billion in FY26 and $17.7 billion in FY27 through October.
What Lies Ahead?
According to JM Financial Institutional Securities, declining crude oil prices could play a crucial role in bringing foreign investors back.
The upcoming US midterm elections on November 3 and developments involving Iran could also influence global investment flows.
Analysts remain cautiously optimistic, stressing that sustained foreign buying will be necessary to confirm a meaningful trend reversal.
