Foreign portfolio investors (FPIs) have reversed a four-month selling streak, becoming net purchasers of Indian equities in July with investments exceeding Rs 15,157 crore, according to data from Central Depository Services (India) Ltd (CDSL). This marks a significant turnaround after sustained withdrawals that began in March 2026.
Breakdown of Recent FPI Activity
In the preceding months, FPIs had withdrawn substantial amounts: Rs 49,340 crore in June, Rs 32,963 crore in May, Rs 60,847 crore in April, and a massive Rs 1.17 lakh crore in March. Prior to this selling spree, foreign investors had infused Rs 22,615 crore into Indian stocks in February 2026.
Year-to-Date Net Selling Continues
Despite the July rebound, FPIs remain net sellers on a year-to-date basis, having withdrawn approximately Rs 2.6 lakh crore from Indian equities in 2026. This figure surpasses the Rs 1.66 lakh crore withdrawn during the same period last year, indicating persistent bearish sentiment over the longer term.
Reasons for the July Reversal
Himanshu Srivastava, Principal Manager of Research at Morningstar Investment Research India, attributed the reversal to increased confidence in India's macroeconomic fundamentals, reduced concerns about energy prices following easing geopolitical tensions earlier in July, and an improved global risk appetite. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, added that improving domestic macroeconomic conditions and currency stability have been crucial in attracting foreign investment. He also noted that FPIs turning sellers in other economies, such as South Korea, and challenges in the semiconductor sector have diverted capital toward India.
SEBI Regulatory Changes
On July 8, 2026, the Securities and Exchange Board of India (SEBI) notified amendments to the Foreign Portfolio Investors (FPI) regulations, replacing the US dollar-denominated fee payment mechanism with a rupee-denominated fee structure for foreign investors and foreign venture capital investors (FVCIs). The changes, which will take effect after six months, aim to provide sufficient adjustment time for foreign investors and intermediaries. According to the notification dated July 3, “In regulation 43B (2), the words and symbols ‘US $1000’ shall be substituted with the words and symbols ‘Rs 90,000 in eligible foreign exchange equivalent’.”
Impact on Indian Markets
The renewed FPI inflows in July have provided a boost to Indian equity markets, which had been under pressure from sustained foreign outflows. Analysts suggest that the combination of stable macroeconomic conditions, regulatory clarity, and global factors may continue to attract foreign investment in the near term, though the year-to-date net selling highlights lingering caution among foreign investors.
