An interesting picture has been seen in the Indian stock market this year. On one hand, foreign portfolio investors (FPIs) are continuously withdrawing money from Indian stocks, while on the other hand, domestic institutional investors (DIIs) and especially retail investors investing through SIP are strengthening the market.
According to NSDL data, till July 10, 2026, foreign investors have withdrawn about Rs 2.59 lakh crore from the Indian stock market. At the same time, domestic investors have invested about Rs 4.8 lakh crore, due to which the effect of selling by foreign investors has been balanced to a great extent.
Can domestic investors handle the market alone?
Nikhil Chawla, managing partner and co-founder of xMultiplied Capital Advisors, says that the increasing participation of domestic investors is good news for the market, but it is too early to assume that they will always make up for the shortfall of foreign investors.
He says that till now the real test of Indian retail investors has not been in any long and big falling market. Domestic investment definitely provides stability to the market, but it cannot become a substitute for long-term foreign investment.
Stock market may remain within range this year
Nikhil Chawla believes that the Indian stock market may trade in a limited range in 2026. There are three big reasons behind this-
- Global tech stocks slow
- Short-term slow pace of Indian economy
- Increasing trend of investment towards the physical economy of the country
- The enthusiasm for AI shares may cool down
There has been a tremendous rise in Artificial Intelligence (AI) related stocks across the world for some time. But now due to persisting inflation in America, the Federal Reserve is adopting a strict monetary policy. This may keep interest rates high for a long time, which may increase pressure on tech stocks with expensive valuations.
However, America’s employment figures for the month of June were weaker than expected. Due to this, the possibility of further increase in interest rates has reduced, but there is no hope of any cut soon.
What are the challenges facing India’s economy?
Experts say that tensions in the Middle East, fluctuations in crude oil prices and weak monsoon can impact India’s economy. The Asian Development Bank (ADB) has reduced India’s GDP growth forecast for FY27 from 6.9% to 6.6%. At the same time, less rainfall can also affect rural demand and farmers’ income.
In which sectors are long term opportunities visible?
Nikhil Chawla believes that India’s biggest investment story is now hidden in the country’s physical economy. According to him, sectors like infrastructure, power, manufacturing, steel, cement, auto, auto components, logistics, pharma, digital payments and domestic tourism can perform better in the coming years. These sectors can benefit from government policies, increasing domestic demand and India’s plan to become a global manufacturing hub.
When can foreign investors return?
Experts say that if the US economy slows down, there is a big decline in AI stocks or global investors look for new markets, then foreign investment may again turn to India.
However, he believes that foreign investment in India will grow in a sustainable manner only when the country presents strong economic growth, better corporate profits, policy reforms and attractive valuations.
PL Asset Management’s CIO Sandeep Neema says that there is no need to panic excessively regarding the selling of FPI. History shows that sell-off periods by foreign investors often bring good investment opportunities for long-term investors. Therefore, investment decisions should not be taken only on the basis of FPI data.
Leave a Reply