FII outflows ease sharply in July as overseas sentiment improves

Foreign institutional investor outflows declined sharply to Rs 5,780 crore in July, the lowest in 2026, signalling improving investor sentiment. Domestic institutional investors remained consistent buyers, while analysts expect positive market momentum despite monitoring crude oil prices and geopolitical developments

Mumbai: The trend in monthly foreign institutional investor (FII) net flows highlights gradual improvement, with net outflows declining from Rs 122,540 crore in March to Rs 70,140 crore in April, Rs 55,960 crore in May, Rs 49,030 crore in June and just Rs 5,780 crore in July, according to provisional exchange data.

FII selling has moderated significantly over past months, indicating a steady improvement in overseas investor sentiment, said analysts. “After witnessing record-high outflows earlier in 2026, the pace of selling has eased considerably, with July recording the lowest monthly outflow of the year, said Pabitro Mukherjee, Deputy Vice President-Research, Bajaj Broking.

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The final week of July marked a notable shift in FII activity. Overseas investors turned net buyers in multiple trading sessions, resulting in net purchases of Rs 5,950 crore for the week, based on provisional exchange data.

This reversal suggests improving confidence in Indian equities amid supportive domestic fundamentals, said the analyst. Meanwhile, domestic institutional investors (DIIs) continue to remain net buyers in all the 7 months in 2026.

For the month of July, DIIs purchased Rs 35,100 crore while in the previous week, DIIs were net buyer by Rs 5,390 crore. According to Vinit Bolinjkar, Head of Research, Ventura, Indian equity markets wrapped up the week on a firm footing, with the benchmark Nifty 50 closing at 24,366.

Domestic sentiment has been bolstered by a decisive turnaround in foreign capital flows. While the USD/INR hovering near 95.42 and Brent crude consolidating around $87 per barrel, demand cautious vigilance on the imported inflation front, strong domestic institutional buying and robust bluechip buying have established a solid market floor, said the analyst.

The near-term outlook remains constructively bullish as investors price in healthy earnings momentum and strengthening macro-liquidity, said market watchers. In August, investors will closely track crude oil price movements and developments in the ongoing US-Iran geopolitical tensions.