A sharp turnaround in trading behavior after weeks of relentless selling
After months of sustained withdrawal, foreign portfolio investors returned as net buyers to Indian markets in the first week of October, channeling Rs 1,751 crore into domestic equities — a reversal that, however modest against the year's cumulative outflow of Rs 1,56,611 crore, signals a possible turn in sentiment. Throughout the long season of selling, driven by tariff anxieties, elevated valuations, and global uncertainty, it was domestic institutional investors who quietly held the floor. Whether this week marks a genuine restoration of foreign confidence or merely a pause in retreat remains the question that will define India's market story in the weeks ahead.
- Foreign investors had been exiting Indian markets relentlessly for most of 2025, pulling out nearly Rs 1.57 lakh crore year-to-date and leaving January alone as a Rs 78,027 crore wound.
- Even within the reversal week, the first two days saw continued selling of over Rs 3,000 crore before buyers abruptly took control across the final three sessions.
- Domestic institutional investors have been the unsung stabilizers throughout, absorbing foreign sell-offs to prevent deeper damage — but analysts warn that buffer is not without limits.
- The net inflow of Rs 1,751 crore trimmed October's outflow to Rs 2,091 crore, a small but symbolically significant improvement that market watchers are treating as a directional signal.
- Sustainability now hinges on a fragile triad: corporate earnings that can justify India's valuations, a global risk appetite that doesn't retreat, and a tariff environment that stops deteriorating.
For most of 2025, foreign portfolio investors had been leaving Indian markets in a steady, relentless stream — month after month of net selling, with only April, May, and June offering brief respite. Then, in the first full week of October, something shifted.
Between October 6 and 10, FPIs reversed course. The week opened with two days of continued selling — Rs 1,584 crore and Rs 1,471 crore offloaded on the 6th and 7th — before buyers took over decisively. The following three sessions brought inflows of Rs 1,663 crore, Rs 737 crore, and Rs 2,406 crore, producing a net positive week of Rs 1,751 crore, confirmed by National Securities Depository Limited data.
Ajit Mishra of Religare Broking described the shift as a sharp turnaround, crediting improving global stability and domestic resilience for the change in foreign investor behavior. He cautioned, however, that the trend would only strengthen if global risk appetite held and corporate earnings kept pace with India's still-elevated valuations.
The scale of what preceded this reversal puts the week in sobering perspective. September alone saw Rs 23,885 crore in outflows. The cumulative year-to-date withdrawal through October stands at Rs 1,56,611 crore — a figure that makes this week's Rs 1,751 crore inflow feel tentative at best. October's net outflow now sits at Rs 2,091 crore, reduced but not erased.
Throughout the long downturn, domestic institutional investors had been the market's quiet backbone, absorbing foreign exits and preventing steeper declines. That support proved essential as FPIs retreated on concerns over Trump-era tariffs, high Indian valuations, and global trade uncertainty. Whether foreign confidence has genuinely returned — or whether this week was merely a tactical pause — will be answered by the earnings season and geopolitical developments that lie just ahead.
For weeks, foreign investors had been pulling money out of Indian markets in a steady, relentless stream. Then, in the first full week of October, something shifted. Between October 6 and October 10, foreign portfolio investors flipped from sellers to buyers, channeling Rs 1,751 crore into Indian equities—a reversal that data from the National Securities Depository Limited now confirms marks a turning point in sentiment.
The week itself tells the story of that reversal in miniature. On October 6 and 7, foreign investors dumped holdings, offloading Rs 1,584 crore and Rs 1,471 crore respectively. But starting October 8, the pattern inverted. Over the next three trading days, they became aggressive buyers, pouring in Rs 1,663 crore, then Rs 737 crore, then Rs 2,406 crore. The net result: a week of positive flows that broke a months-long drought.
Ajit Mishra, Senior Vice President of Research at Religare Broking, characterized the shift as a sharp turnaround in foreign investor behavior. He attributed the change to improving sentiment toward Indian equities, supported by what he called global stability and domestic resilience. If sustained, he suggested, continued foreign inflows could strengthen the market trend—but only if global risk appetite holds and corporate earnings keep pace.
The broader context matters. Throughout the selling pressure of recent months, domestic institutional investors had been the stabilizing force, absorbing the foreign sell-offs and preventing deeper market damage. That support proved crucial as foreign investors exited on concerns about Trump's tariffs, the high valuations of Indian companies, and an uncertain global trade environment.
The numbers reveal the depth of the outflow that preceded this week's reversal. In September alone, foreign investors pulled out Rs 23,885 crore. For the full year through October, the cumulative withdrawal stands at Rs 1,56,611 crore. This week's Rs 1,751 crore inflow reduced October's net outflow to Rs 2,091 crore—a modest improvement, but improvement nonetheless. The pattern across 2025 has been brutal: only April, May, and June saw net inflows; every other month has recorded selling, with January the worst at Rs 78,027 crore.
What happens next depends on whether this week represents a genuine shift or merely a tactical bounce. Foreign investors will be watching corporate earnings closely, monitoring whether Indian companies can justify their valuations in a slowing global environment. They will also be tracking geopolitical risk—particularly the tariff situation that triggered much of the recent selling. Domestic institutional investors, for their part, have shown they will continue to step in when foreign money retreats, but that support has limits. The market's stability in coming weeks will hinge on whether foreign confidence, once restored, can hold.
Notable Quotes
The shift underscores improving foreign investor sentiment toward Indian equities, supported by global stability and domestic resilience.— Ajit Mishra, Senior Vice President, Research, Religare Broking
Sustained FII inflows from here could further strengthen the market trend, provided global risk appetite remains intact and earnings momentum continues.— Ajit Mishra, Senior Vice President, Research, Religare Broking
The Hearth Conversation Another angle on the story
Why did foreign investors suddenly reverse course this week after months of selling?
The data shows they were spooked by tariff uncertainty and valuation concerns, but something in the global picture stabilized enough for them to start buying again. It wasn't a single event—more like a collective reassessment that the worst-case scenario might not materialize.
But they sold heavily on October 6 and 7. What changed between October 7 and October 8?
That's the puzzle. The turnaround was sharp enough that it suggests either new information arrived or they simply decided the prices had fallen far enough to be worth buying. The data doesn't tell us which.
How much damage did the selling do to the market overall?
Domestic institutional investors absorbed most of it. They kept buying when foreigners were selling, which prevented a collapse. But that's a finite resource—they can't absorb losses forever.
Is this week's inflow enough to change the year's trajectory?
Not remotely. We're down Rs 1,56,611 crore for the year. One good week doesn't erase that. What matters is whether this signals a real change in sentiment or just a blip.
What would make foreign investors confident enough to stay?
Corporate earnings that justify valuations, and a resolution to the tariff uncertainty. Right now both are in question. They'll be watching quarterly results closely.
If they leave again, what happens?
The domestic institutions step in again, but the market loses momentum. Without foreign capital, growth slows. That's the real risk.