After a period of significant outflows, foreign institutional investors (FIIs) are showing signs of renewed interest in the Indian equity market, according to Vaibhav Chugh, CEO of Abakkus Mutual Fund. Chugh suggests that the very factors that deterred FIIs in 2024 have now transformed into positive drivers for the market.
Indian equity markets experienced a challenging period, with FPIs selling a massive Rs 2.38 lakh crore worth of equities in 2026, following Rs 1.66 lakh crore in 2025. This downturn saw the BSE Sensex and NSE Nifty50 decline by over 8% and 7% year-to-date in 2026, respectively. The primary reasons for these outflows included expensive valuations, global trade and geopolitical uncertainties, and the allure of AI-related investment themes in other global markets.
FIIs Re-evaluating India's Market
Chugh highlights a significant shift in market dynamics. “In 2024, the reasons for which FIIs started pulling out, most of those things are already behind us,” he stated. He pointed out that India, once a top-performing market with low earnings visibility and high valuations, is now among the least performing markets but boasts some of the best earnings visibility. The initial excitement around AI plays, which diverted capital, has also largely run its course.
Recent data supports this changing sentiment. In July 2026, FPIs invested Rs 20,200 crore in the equity market, followed by net buying of Rs 16,270 crore up to August 13 of the same month. While FIIs are certainly looking at India again and expressing interest, their approach remains highly selective.
“They are finding good companies, where there is comfort in earnings and valuations,” Chugh explained, emphasizing that investors are not indiscriminately picking stocks.
Emerging Growth Sectors and Abakkus's Strategy
Chugh also identified several new sectors driving growth in India, which investors should consider for future-ready portfolios. These include electric vehicles, cyber security, medical tourism, lifestyle, quick commerce, and quick service restaurants (QSRs). He stressed that structural presence in these evolving sectors is crucial to avoid underperformance in the future.
Abakkus Mutual Fund, founded by veteran investor Sunil Singhania, adopts a rigorous bottoms-up stock selection process, guided by its MEETS (management, earnings, events and trade, timing and structural) framework. The fund house focuses on identifying companies with strong earnings growth, aiming for earnings to double within four to five years, and preferring those whose growth surpasses nominal GDP.
Looking ahead, Abakkus plans to expand its offerings with new funds, including a balanced advantage fund, aggressive hybrid, and arbitrage fund, alongside a specialized investment fund (SIF).
Mutual Fund Industry Poised for Expansion
The broader Indian mutual fund industry continues to grow, with net assets under management (AUM) reaching Rs 85.76 lakh crore by July 2026. Despite strong inflows into debt funds, equity fund inflows saw a slight decline in July. Chugh remains optimistic about the industry's long-term potential, noting that with only about 6.2 crore unique mutual fund investors in a population of 140 crore, there is immense room for growth and penetration.