After months of selling, FIIs buy in 6 of last 7 sessions, pump Rs 8,000 crore; sentiment shifting?

After months of relentless selling, foreign institutional investors (FIIs) appear to be rediscovering their appetite for Indian equities, signaling a possible shift in sentiment towards domestic markets.

Data from the National Securities Depository Limited (NSDL) shows that between April 10 and April 21, FIIs turned net buyers in six of the last seven sessions, purchasing nearly Rs 8,000 crore in the Indian equity market. Of this, around Rs 6,500 crore was deployed in the secondary market, while Rs 1,500 crore flowed into primary markets.

The renewed buying has coincided with a steady uptrend in benchmark indices amid easing tensions in the US–Iran–Israel conflict. Since the beginning of April, both the Sensex and Nifty have risen around 9.2 percent each, while the BSE MidCap 150 index has climbed 14 percent and the BSE SmallCap 250 index has advanced 17.6 percent.

The sudden reversal in foreign flows has caught many market participants by surprise. While some see this as a short-term rebound, others attribute it to improved valuations following the recent correction, along with steady corporate earnings despite ongoing geopolitical challenges.

Currently, benchmark indices are trading at more moderate valuations, with the Sensex and Nifty at around 18.5x one-year forward price-to-earnings multiples, compared with their long-term averages of 19.8x and 19x, respectively. However, broader markets remain relatively expensive, with the BSE MidCap 150 trading at 26.84x versus its 10-year average of 24.88x, and the BSE SmallCap 250 at 24.14x compared to 18.4x.

Rajesh Palviya of Axis Securities said most negative factors are already priced into the market, and despite global uncertainties such as tariffs and geopolitical risks, India’s growth trajectory remains intact. He added that there has been no major disruption to the domestic economy so far, while continued inflows from retail investors and domestic institutions have provided stability.

Palviya noted that investors largely view the geopolitical situation as temporary and are using the correction as an opportunity to deploy capital. He also highlighted that FIIs have been selectively buying sectors less impacted by geopolitical risks, including FMCG, banking and automobiles, where recovery trends are visible.

The return of FII buying, he said, could indicate that markets may be nearing the end of the conflict phase. Looking ahead, he expects flows to continue, supported by improving valuations and recovery in oversold sectors. He remains positive on metals, automobiles, capital goods, banking and power.

The latest inflows mark a sharp contrast to heavy outflows seen earlier this year. From the start of 2026 till the end of March, FIIs had sold a net Rs 1.65 lakh crore. During this period, the Sensex and Nifty declined 15.6 percent and 14.5 percent, respectively, while the BSE MidCap 150 and BSE SmallCap 250 indices fell 13 percent and 15.3 percent.

The earlier selling was largely driven by stretched valuations and geopolitical tensions, including the trade war and the US–Iran–Israel conflict, which raised macroeconomic concerns for India, particularly through rising crude oil prices and their impact on fiscal balance.

Nilesh Shah, MD of Kotak Mahindra AMC in its recent note, said the current market environment is being shaped by multiple factors, including elevated oil prices, supply chain disruptions and geopolitical uncertainties, which are weighing on near-term corporate earnings. However, he maintained that India’s long-term growth story remains intact, supported by strong domestic flows.

Shah highlighted a key paradox in the market — while near-term fundamentals appear under pressure, consistent inflows from retail investors are providing stability. He noted that the investment approach in such an environment should be bottom-up, focusing on businesses that are resilient to geopolitical shocks and available at reasonable valuations.