After a challenging period, foreign portfolio investors are gradually returning to Indian markets, focusing on sectors aligned with the country’s upcoming growth trajectory, despite ongoing caution amid mixed performance data.
Foreign portfolio investors may be edging back to Indian equities after a bruising stretch for the market, according to Vaibhav Chugh, chief executive of Abakkus Mutual Fund. Chugh told Business Today that many of the pressures that drove overseas investors out in 2024 have now eased, while the case for Indian stocks is stronger on valuations and earnings visibility.
India’s share market has lagged much of the world in 2026, with the Sensex down more than 8% year to date and the Nifty 50 off roughly 7%, after a difficult 2025 as well. That underperformance has contrasted with the resilience seen in several other major markets, and it has left domestic investors with little to show since late 2024, even as global equities surged.
Chugh argued that the shift in market leadership has created a better entry point for foreign investors. In his view, India has moved from being one of the costliest major markets with limited earnings clarity to one of the weakest performers with improving profit prospects. He said much of the artificial intelligence-driven rally abroad has already played out, reducing one of the factors that had once drawn capital away from India.
The numbers suggest foreign interest has started to recover. According to LiveMint, foreign portfolio investors bought a net Rs 17,227 crore of Indian equities in July 2026, ending a four-month run of outflows. Business Today also reported that overseas investors were net buyers of Rs 16,270 crore through August 13, after heavy selling earlier in the year. Even so, the broader picture remains one of caution: foreign investors sold about Rs 2.38 lakh crore of Indian shares in 2026 so far, following Rs 1.66 lakh crore of outflows in 2025.
The comeback, though, appears selective rather than broad-based. Chugh said overseas buyers are looking closely at companies with clear earnings strength and reasonable valuations, rather than chasing the wider market. He pointed to opportunities in sectors tied to the next phase of India’s growth, including electric vehicles, cybersecurity, medical tourism, quick commerce and fast-food chains. LiveMint said healthcare and metals were among the sectors benefiting from renewed foreign buying, while auto and capital goods remained under pressure.
Abakkus itself is still a relatively new player in India’s fast-growing fund industry. Founded by veteran investor Sunil Singhania, it began offering mutual fund schemes only in December 2025 and now runs four funds. Business Today said its average assets under management in the April-June quarter were about Rs 5,580 crore, based on Association of Mutual Funds in India data. Chugh said the firm favours bottom-up stock picking and avoids top-down bets or momentum trades.
The wider industry continues to expand, even if penetration remains low by global standards. AMFI data released in July showed net assets under management for India’s mutual fund industry at Rs 85.76 lakh crore, up from Rs 82.22 lakh crore in June, helped by debt-fund inflows. Equity inflows, however, fell about 15% month on month to Rs 24,685 crore from Rs 28,961 crore. Chugh said India’s mutual fund market still has ample room to grow, noting that the country has about 6.2 crore unique mutual fund investors in a population of 140 crore.
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