Foreign investors are pouring money back into Indian equities, but the Nifty and Sensex are refusing to join the rally. FII inflows crossed $3.2 billion in August, the highest monthly level since September 2024, even as both benchmark indices fell more than 1% during the month.
The divergence has left investors searching for an explanation. Historically, a shift in FII sentiment has triggered a sharp rally in largecaps and lifted the Nifty and Sensex. This time, however, small- and midcap stocks are closer to their record highs while the Nifty remains about 8.2% below its all-time high touched in early January 2026.
