FPIs return to Dalal Street amid AI sell-off and oil slump; Can proposed tax cuts sustain inflows?

Résumé détaillé

FPIs have poured ₹53,739 crore into Indian equities in November so far. The inflows have helped the Nifty 50 extend its winning streak to seven consecutive sessions, enabling the benchmark index to pare its year-to-date losses to 4.15%.

Indian stocks have staged a strong comeback in recent sessions, with benchmark indices witnessing a sustained rally that bulls had been eagerly awaiting since the beginning of the year.

While there have been no significant domestic triggers behind the upmove, the rally has largely been driven by the return of foreign investors, who had largely stayed away from Asia's third-largest economy in recent months.

Their shift in sentiment comes amid a rotation away from AI-linked stocks, driven by concerns over a slowdown in data center expansion following the Democrats' victories in both houses.

A sharp retreat in crude oil prices has also boosted foreign investors' optimism towards Indian equities, prompting FPIs to pour ₹53,739 crore into domestic stocks in November so far, according to NSDL data. The inflows have helped the Nifty 50 extend its winning streak to seven consecutive sessions, enabling the benchmark index to pare its year-to-date losses to 4.15%.

The key question now is whether the return of foreign investors signals a durable turnaround or is merely a tactical shift driven by global developments and expectations of tax relief.

To understand what is driving the change in FPI sentiment, the possibility of capital gains tax relief, and whether the recent inflows can be sustained, Manoj Purohit, Partner & Leader, Financial Services Tax, Tax & Regulatory Services, BDO India, shared his views.

Foreign investors are reassessing their current exposure to India amid ongoing discussions and representations by industry bodies and various associations seeking tax breaks on long-term investments.

In addition to expectations of tax relief, the recent US midterm elections could influence the revision and revival of various trade policies.

In 2026, to date, FPIs have been constantly exiting the Indian capital market; however, the recent few weeks have witnessed a wait-and-watch approach towards large stake sales in Indian listed companies, as expectations of capital market tax…

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