Foreign portfolio investors bought a net ₹537.39 billion, or $5.71 billion, of Indian equities between November 2 and 9, reversing withdrawals of ₹707.04 billion, or $7.51billion, across September and October. For domestic investors encouraged by the turnaround, the question is whether foreign funds have become more confident about India or simply less comfortable elsewhere.

Investors need not revise India’s long-term prospects to find its shares more attractive. Reduced enthusiasm for artificial intelligence stocks and reduced anxiety about India’s oil bill can change the allocation calculation without changing their assessment of the economy.

India’s limited exposure to AI hardware previously left it less attractive than Asian markets populated by semiconductor suppliers. As investors reconsider concentrated AI positions, India’s market depth and broader choice of non-AI businesses offer somewhere to diversify.

Bloomberg reported that LOGOS Asset Management’s Charlie Hong sold holdings including SK Hynix and Samsung Electronics in October and subsequently increased Indian holdings in financial firms, technology companies and contract drug manufacturers. That is evidence of rotation, although one manager’s decisions cannot explain the entire buying spree.

AI exuberance may have weakened, but adoption continues within India’s technology companies, whose enthusiasm for productivity gains leaves harder questions about future hiring and who captures the savings. Clients need not cancel contracts to constrain revenue growth if they expect more work for the same money, or the same work for less.

India’s limited exposure to chipmakers therefore offers diversification from the AI trade, not immunity from its commercial consequences. Reuters has also reported that some customers are bringing work in-house, adding another complication to the argument that Indian technology companies will simply benefit from greater efficiency.

Oil Changes Returns
Cheaper crude oil provides a more direct economic benefit by reducing India’s import bill and demand for dollars. Foreign equity inflows increase dollar supply, supporting the rupee from another direction and reducing the risk that currency losses erode overseas investors’ gains on shares. 

The potential benefit extends beyond currency comfort to company costs and consumer spending. Citi estimates that a $10-a-barrel decline in crude could narrow India’s current-account deficit by 0.3–0.4 percentage points, lower inflation by about half a percentage point and increase Nifty 50 company earnings per share by roughly 2%.

Those are brokerage estimates, but they explain why describing the buying as merely tactical would be premature. A preference initially prompted by discomfort elsewhere can become more durable if Indian companies deliver better profits.

Price Matters
Valuations complicate that progression because Indian shares are not cheap across the board. HSBC upgraded India to overweight but still described it as Asia’s most expensive equity market, with the FTSE India index trading at around 19 times expected earnings, broadly matching its long-term average.

Lower valuations also need interpretation rather than celebration. HSBC notes that cheaper IT shares partly reflect slower earnings growth and AI-related pricing pressure, illustrating why a falling multiple does not automatically create better value.

Foreign portfolio investor buying is a reason to revisit assumptions rather than relax them, particularly when renewed demand can lift prices before profits improve. The distinction between a tactical return and a strategic allocation will become clearer through earnings delivery, not another impressive weekly flow figure.

The next earnings season should show whether cheaper oil is supporting margins and whether profit growth justifies the prices investors now accept. If those improvements materialise, India will have a stronger claim on foreign capital even when investors become comfortable owning AI shares again.