Foreign portfolio investors (FPIs) have invested more than $2 billion in Indian equities over the past 10 days, signalling a potential improvement in foreign investor sentiment amid resilient domestic economic growth and better-than-expected corporate earnings.

According to the latest data, total foreign investments across stock exchanges and primary markets stood at $2.28 billion during the period. Of this, $1.14 billion came through stock exchanges, while another $1.14 billion was invested through primary market offerings and other off-market transactions.

The record listing of Jio Platforms on October 28 contributed significantly to the inflows, accounting for nearly half of the total buying during the period. The stock listed at Rs 1,358 per share, representing a 21.4% premium to its issue price, and closed the session at Rs 1,419.

The improvement in foreign investor sentiment comes at a time when global markets are facing pressure from a sell-off in artificial intelligence and semiconductor-related stocks. Major indices such as the Nasdaq, Kospi and Taiwan Weighted Index have witnessed significant declines, reflecting concerns over valuations and the sustainability of the AI-driven rally.

India's domestic-oriented market has increasingly attracted investors seeking exposure to traditional sectors amid volatility in global technology stocks. Indian benchmark indices gained approximately 2% in October, outperforming several emerging markets.

The decline in Brent crude prices from $115 to $104 per barrel has also provided some relief to domestic markets. Lower crude prices could help ease inflationary pressures, improve India's import bill and support the country's current account position.

Global financial conditions have also become relatively supportive. The US Federal Reserve maintained its benchmark interest rate at 3.75% to 4.00% during the previous week, while Chair Kevin Warsh's commentary was less hawkish than expected. The US 10-year Treasury yield subsequently eased to around 5.0%.

Domestically, the Indian rupee has remained relatively stable following measures introduced by the Reserve Bank of India to support currency stability. Expectations of a possible revision in long-term capital gains taxation for foreign institutional investors have also contributed to improving sentiment.

Despite the recent recovery in inflows, foreign investors have continued to withdraw substantial amounts from the secondary market. According to JM Financial, the FPI sell-off across FY2025, FY2026 and FY2027 has been the deepest on record.

Since July 2022, foreign investors have net sold $51.5 billion in secondary markets, while investing $36.3 billion in primary issues and other off-market transactions. Over the past 12 months, secondary market outflows have reached $39 billion, compared with $9.2 billion in primary market inflows.

The sustained selling has also reduced India's representation in the MSCI Emerging Markets Index. India's weight declined from a peak of 20.0% in July 2024 to 10.7% in September 2026. A lower index weight reduces the allocation required by benchmark-driven funds, potentially limiting structural foreign investment flows into Indian equities.

Market participants believe that the recent improvement in FPI flows could support investor sentiment, although the sustainability of the recovery will depend on global developments and domestic earnings performance.

Brent crude prices, developments in the US-Iran and Russia-Ukraine conflicts, and ongoing quarterly earnings announcements will remain important factors influencing market direction. Investors will also closely monitor the outcome of the upcoming US midterm elections.

Pabitro Mukherjee, Deputy Vice President of Research at Bajaj Broking, said that these global and domestic developments would remain key determinants of investor sentiment.