FPI buying returns to Dalal Street as global investors rethink AI bets

Mumbai: After aggressively selling in September and the first half of October, foreign portfolio investors (FPIs) have turned net buyers of Indian equities, investing nearly $1.2 billion over the past 10 trading sessions. Concerns over the outlook for the AI trade could have prompted some overseas investors to shift allocations to beaten-down Indian equities, which have lagged behind various regional peers recently in the absence of a dominant AI industry. The recent purchases, however, may be positional flows looking for avenues that are less impacted by the AI sell-off rather than a fresh bullish call on India by global investors.

"Indian large-cap stocks, particularly banks and IT companies, are being viewed as an anti-AI trade, attracting model-driven flows rather than a broad-based return of long-only foreign investors, said Ritesh Jain, founder of Pinetree Macro.

Between October 16 and October 30, FPIs made net purchases of nearly $1.2 billion in the secondary market, according to NSDL data. On October 30, they bought equities worth ₹3,600 crore, according to provisional NSE data. In the primary market, they were buyers worth $600 million, with Jio Telecom's ₹30,188 crore IPO expected to have cornered a large chunk of these flows.


"There is a shift in global investment flows because of signs of a deflation in the artificial intelligence (AI) trade," said Jain. "When the AI trade is doing well, money moves from the rest of the world into the US as investors buy dollars to invest in US AI stocks. When they sell these stocks, they also move out of the US dollar."

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Indian markets delivered a mixed performance in October. The Sensex and Nifty gained 1.9% and 2.7%, respectively, while the BSE Midcap 150 and BSE SmallCap 250 fell 4% and 6.3%. The Nifty IT index surged 17%.

Overseas markets, meanwhile, saw sharp corrections, with the Nasdaq and Japan's Nikkei falling 5% each, Hong Kong's Hang Seng declining 5.5%, Shenzhen dropping 13.7%, and Taiwan and South Korea's Kospi falling 8% and 14%, respectively.

Fund managers are seeing selective opportunities in India after the recent underperformance, said strategists. "A small portion of the inflows reflected selective foreign investors returning to India on a bottom-up basis, attracted by improving growth prospects and opportunities in certain technology sectors," said Gautam Chhaochharia, head of global markets, India, at UBS.

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The recent buying follows a prolonged period of foreign outflows. Between January 1 and October 15, they sold equities worth over $32.7 billion amid the US-Iran war, rising crude oil prices, hardening bond yields, currency depreciation, earnings uncertainty and inflation. They had also sold equities worth over $18.8 billion in 2025.

Though overseas investors bought nearly $6.15 billion in Indian equities between mid-June and August, they pulled out $8.6 billion in September and the first half of October as a spike in global oil prices and hardening of US bond yields heightened risk-off sentiment.

"The recent pressure on Indian markets had been driven more by global factors, including the strength of the AI trade and higher energy prices, than by domestic fundamentals," said Ben Powell, chief investment strategist for Middle East and Asia-Pacific at BlackRock Investment Institute.

BlackRock remains strategically overweight on India and is closely monitoring the recent pace of foreign inflows. "We continue to closely watch the encouraging recent pace of inflows and remain strategically overweight India," he said.