India stocks attract biggest foreign inflow in nearly six years as oil drops and AI trade cools

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India stocks attract foreign inflow

Highlights

Foreign investors bought 147.96 billion rupees of Indian shares on Thursday, the largest daily inflow since February 2021, amid falling oil prices and a global AI trade cooldown.
Net foreign inflows over the past five sessions reached 208.35 billion rupees ($2.20 billion), reversing a $30 billion outflow through October as Indian assets regain investor focus.
Nifty 50 and Sensex surged 2.4% to 24,536.6 and 79,310.01 on Thursday, extending a six-session rally of over 8% and narrowing their underperformance versus emerging-market peers.

Foreign buying gathers pace

As reported by Reuters, provisional stock exchange data show overseas investors buy 147.96 billion rupees of Indian shares on Thursday, the most since February 24, 2021, when purchases of 287.39 billion rupees included a large promoter-driven block deal.

The shift comes as oil prices fall sharply after the U.S. midterm elections, while a selloff in artificial intelligence-related stocks prompts global funds to rebalance exposure. India, a major oil importer, has underperformed emerging-market peers this year as elevated crude prices raised concern over the economic outlook, while its relative lack of AI-linked stocks kept some investors away.

Analysts say the combination of lower oil prices and a reassessment of crowded AI trades could bring Indian assets back into focus. Anand Gupta, lead portfolio manager for India equity at Allianz Global Investors, says accelerating earnings, below-average valuations and low foreign ownership make India an attractive opportunity.

Market rebound narrows gap with peers

Foreign investors have already been turning selective buyers before the U.S. election results become clear. Over the past five sessions, they buy a net 208.35 billion rupees, or about $2.20 billion, of Indian stocks, reversing course after selling a record $30 billion of Indian equities through October.

The Nifty 50 and Sensex jump 2.4% on Thursday to 24,536.6 and 79,310.01, respectively. The benchmarks have gained more than 8% over six sessions, their longest winning streak in a year, helping narrow their underperformance against other emerging markets.

Siddhartha Khemka, head of research for wealth management at Motilal Oswal Financial Services, says Indian equities should maintain a positive trajectory. He adds that the U.S. midterm election outcome lifts global sentiment, with expectations of a more measured approach to trade and tariffs, alongside a weaker U.S. dollar and easing 10-year U.S. Treasury yields.

Our earlier report on the Reserve Bank of India’s rupee defence explained how the central bank deployed an estimated $75–$80 billion from special FX measures to support the currency as high oil prices, rising U.S. Treasury yields, and persistent foreign outflows intensified pressure. The piece also highlighted concerns about falling usable reserves and noted that the RBI has tended to act more forcefully as USD/INR approaches the 97 level, alongside steps aimed at reducing dollar demand from importers and oil companies.

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