Foreign Portfolio Investors pulled roughly ₹48,000 crore out of Indian equities between November 2025 and February 2026, citing high valuations and better relative value in other emerging markets. In April, the tide has started to turn. FPIs have been net buyers for two straight weeks. Here's what changed.
Why they left
Indian large caps were trading at a Nifty 50 forward P/E of 22x in late 2025, a meaningful premium to emerging market peers. Meanwhile, China's stimulus optimism pulled some allocations, and Korean and Taiwanese tech names were cheaper on a growth-adjusted basis. The rotation out of India was a valuation story, not an India story.
Why they're coming back
Three things changed. First, the Nifty 50 corrected modestly (down 6% from peaks), bringing forward P/E closer to 20x — more palatable. Second, Q4 FY26 earnings are showing decent upgrades in banking and IT. Third, the dollar has weakened slightly, which historically correlates with positive EM flows.
The DII counterweight
Even through the FPI outflow period, domestic institutional investors (mutual funds, insurance, pension funds) were net buyers every single month. Monthly SIP inflows crossed ₹27,000 crore for the first time in March 2026. This domestic flow has become the real support under Indian markets — far more important than FPIs for day-to-day direction.
What it means for you
If you're an SIP investor, FPI flows shouldn't change your behavior at all. DII flows are strong enough to absorb normal FPI volatility. If you trade more actively, FPI flows are a useful short-term sentiment indicator — sustained outflows often coincide with mid-cap pressure, and sustained inflows often trigger large cap rallies.
The bigger picture
India's weight in global emerging market indices has risen from 8% a decade ago to over 20% today. Foreign flows will remain volatile as long as valuations stay premium, but the structural story (demographics, domestic consumption, digital adoption) hasn't changed. Ride the noise, focus on the signal.
What we're watching
The next FPI-relevant event is the June MPC decision and Q1 FY27 earnings. If both come in benign, flows likely stay positive through the summer. If either disappoints, expect another round of mild outflows. In either case, SIPs are your friend.