Foreign institutional investors (FIIs) could re-enter Indian equities as corporate earnings visibility improves and valuations become more compelling versus global peers, Vaibhav Chugh, CEO of Abakkus Mutual Fund, said in an interview with Fortune India.
What the numbers show
Chugh pointed to a shift in the investment case for India: after a period when the market traded at high multiples despite limited earnings clarity, he said earnings prospects now look stronger and more broad-based. That, coupled with current price-to-earnings ratios in the 20–23 times range, makes India comparatively attractive to global investors, he added.
“I think it is high time for them (FIIs) to come back,” Chugh said, adding that foreign investors look at numbers rather than narratives.
Chugh contrasted India’s situation with some East Asian markets that drew quick capital inflows when earnings momentum became visible. He cited South Korea and Taiwan as examples where concentrated high-growth sectors pulled global money rapidly, and argued India is developing a similar long-term earnings story across more industries.
Domestic flows remain a stabilising force
While FIIs have been net sellers so far in 2026, domestic institutional investors (DIIs) and retail participation via systematic investment plans (SIPs) have provided steady liquidity. Abakkus’ CEO described these domestic flows as a structural cushion that has helped markets absorb foreign outflows.
Key aggregate figures for 2026 to date (as reported) underline the divergence between foreign and domestic investors:
- FIIs: net sellers of ₹3.49 lakh crore (gross purchases ₹24.52 lakh crore, sales ₹28.01 lakh crore).
- DIIs: net buyers of ₹5.40 lakh crore, maintaining consistent purchases.
| Investor Type | Gross Purchases | Gross Sales | Net (YTD 2026) |
|---|---|---|---|
| FIIs | ₹24.52 lakh crore | ₹28.01 lakh crore | −₹3.49 lakh crore |
| DIIs | — | +₹5.40 lakh crore | |
What it means for investors and markets
For market participants, the shift in emphasis from narrative-driven flows to earnings-driven allocation could change where and how capital is deployed. Chugh expects FIIs to place greater weight on concrete earnings trends rather than short-term storylines, implying that sectors and companies showing sustained profit expansion may attract renewed foreign interest.
For retail investors, the immediate implication is twofold: first, domestic SIP participation continues to provide resilience to market volatility; second, a broadening earnings base could reduce single-sector concentration risk and create more diversified opportunities across the market.
However, Chugh’s view does not imply an imminent reversal of the full FII outflow seen so far in 2026. Repatriation of foreign capital often follows visible and sustained earnings upgrades and can occur quickly once confidence builds, as illustrated by recent global examples. Policymakers and market participants will be watching corporate reporting cycles, macro stability and global liquidity conditions for confirmation.
Context and caution
Chugh’s observations underscore two structural dynamics in India’s equity market: relatively attractive valuations compared with some global markets, and robust internal demand powered by DIIs and retail SIPs. He cautioned that FIIs focus on measurable earnings trends; therefore, the pace and extent of any return will depend on how convincingly corporate profits improve across sectors, not on headlines alone.
Investors should interpret these signals as potential directional indicators rather than forecasts. The interplay of corporate earnings, domestic savings behaviour and global capital flows will determine market performance going forward.
Note: Figures cited are from the reporting referenced in the interview and reflect gross and net flows recorded so far in 2026.
