On November 09, Foreign Institutional Investors (FIIs) net bought equities worth Rs 7,212.22 crore. In the last two weeks, FIIs have net purchased equities of Rs 60,939 crore. FPIs pulled out $61 billion since September 2024, while $31 billion exited in the first 10 months of 2026.
However, the rend reversed in since mid of October as $8.2 billion net inflows came in and $5.8 billion came from just six sessions of November, trimming outflows this year to about $25 billion.
“Given the new favourable environment for the Indian market, FIIs are likely to continue buying, imparting resilience to the frontline stocks in banking/financials, telecom, capital goods, select auto and pharmaceutical majors. This rally, which has more steam left, will be led again by large caps,” said VK Vijayakumar, Chief Investment Strategist of Geojit Investments.
Given India’s healthy macroeconomic fundamentals, strong corporate earnings, a meaningful correction in valuations from their 2024 peak levels, and robust domestic liquidity, any moderation in the global AI trade could encourage a stronger and more sustained revival in FII interest in relatively underperforming Emerging Markets such as India, said Motilal Oswal.
Largecap and other beneficiary stocks
Large-cap Indian stocks are likely to be the biggest beneficiaries of a revival in overseas inflows given higher liquidity and ownership of foreign investors, according to Jefferies.
Large caps are a “cleaner play on an FPI return,” analysts led by Abhinav Sinha write in a note.
Reliance, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Max Healthcare, JSW Energy, UltraTech Cement, IndiGo, Max Healthcare are among potential beneficiaries of an FPI reversal.
“Potential AI-trade reversal, any equity tax relief, resilient domestic macro, reasonable large-cap valuations and light positioning could sustain the flows,” said Jefferies.
“Easing FII selling in large-cap-heavy sectors also supported the relative outperformance of large caps over SMIDs during the month,” said Motilal Oswal.
Why does Jefferies see the flow lasting?
Jefferies said that AI trade is cooling down as MSCI Korea fell 40 per cent from its all-time high. The crude oil price has dropped 20 per cent from October highs, which is a positive for the rupee.
Also, there’s a potential equity tax relief boosts due to which India looks appealing. Plus, the macroeconomics of India looks strong as MSCI India earnings upgraded 1.5 percentage point.
“Continued improvement in FII sentiment, coupled with easing geopolitical challenges, could help offset the headwinds that have weighed on Indian markets over the past two years and lay the foundation for a sustained market rally,” said Motilal Oswal.