Foreign Investors Return to Indian Equities After Months of Heavy Selling

Synopsis

Foreign institutional investors net bought ₹14,975 crore of Indian shares on November 5, the highest amount in more than a year on the bourses, according to reports. This was the highest since 2023 in four sessions till November 4. Analysts attribute the outflows to weak AI trades and valuations after record outflows this year. They warn that it's not yet a trend, either.

Foreign institutional investors were net buyers on Thursday, November 5 with provisional data indicating that they bought ₹14,974.68 crore worth of shares. They bought ₹31,797.86 crore of shares and sold ₹16,823.18 crore.

It is reported to be the largest single day net purchase in more than a year. The “nearly six years” mentioned in some briefs was not substantiated. According to NDTV Profit's analysis, net buying was the highest in four sessions since 2023 at ₹20,834.04 crore.

Foreign portfolio investors purchased ₹7,284.03 crore while domestic institutions sold ₹3,712.23 crore on November 4. The estimates of the total for the week range from ₹38,971 crore to ₹45,960 crore.

The backdrop

The turn comes after a substantial time of selling. The amount of money spent in March was a record ₹1.18 lakh crore, followed by ₹60,847 crore in April. NSDL data pegged October net withdrawals at ₹34,843 crore, whereas such tallies based on exchanges are bigger as they employ different methodologies. Business Standard has quoted that the outflows during calendar year have exceeded ₹3 trillion, close to doubling the 2025 amount.

Why they are returning

Geojit Investments' Vijayakumar cited several factors - the Federal Reserve of the United States (Fed) kept the policy rate unchanged, high valuations in large caps, and some positive signals of continued growth and improving investor interest in industrial capex. Another factor, he said, is the slump in the international AI trade globally. That crude is also on the decline, which India relies mainly on.

Foreign buying has been supporting large cap stocks and sentiment has improved, with financials seeing significant inflows. Vijayakumar also noted that while inflows were welcome, they weren't “a trend” and banks and financial stocks could benefit more if buying continues.

The caution

A sudden surge point is not a strong signal of a lasting trend. Investors will be looking for any additional capital inflows, earnings to support valuations, and continued low crude prices. If any of the three reverses occur then the game can change fast.