Synopsis: India’s earnings story has improved sharply, but the market isn’t pricing it in. Nifty 50 and Sensex are down 8-10% in 2026, with Sensex off 9.67% YTD as of August 31, even after Nifty 50 companies posted some of their strongest quarterly profit growth in years.
Foreign investors have net sold Indian equities to the tune of roughly ₹2.23 lakh crore this year, yet they’ve just delivered their strongest month of buying in nearly two years. Abakkus Investment Managers says a crowded IPO calendar, not weak fundamentals, may be the bigger obstacle to a broader rally from here.
Nifty 50 companies have delivered some of their strongest quarterly profit growth in recent years, yet the index remains down in the 8-10% range for 2026, with the Sensex specifically off 9.67% year-to-date as of August 31. Meanwhile, foreign portfolio investors (FPIs) have sold a net of roughly ₹2.23 lakh crore of Indian equities this year, even after returning as buyers for two straight months.
Abakkus Investment Managers, which manages $5.2 billion in assets, argues the disconnect comes down to two forces: lingering global risk aversion and a flood of new equity supply competing for the same pool of capital.
FPIs Are Buying Again — Just Not Enough to Erase the Year’s Damage
The turnaround has been real. FPIs invested ₹20,200 crore in July and followed it with ₹30,919 crore in August, the second straight month of net buying and the strongest monthly inflow since September 2024, roughly two years ago.
That’s meaningfully narrowed the year’s outflow but not reversed it: FPIs remain net sellers of about ₹2.23 lakh crore for 2026 so far, a gap the last two months of buying have chipped away at rather than closed.
Aman Chowhan, head of equities of Alternates at Abakkus AMC, told Reuters that India’s fundamentals remain solid domestically, but external pressures, elevated crude prices, rising global bond yields, and volatility in the AI trade are working against Indian equities from the outside in.
IPO Supply Is Draining Secondary Market Liquidity
Abakkus argues that the surge in IPOs, QIPs, and block deals is competing with secondary-market stocks for the same institutional capital.
Chowhan put it bluntly: “Every other day there’s an IPO… some promoter selling, some QIP.” Twenty-seven mainboard IPOs raised ₹22,572 crore ($2.36 billion) in the first half of 2026 alone, and a packed August pipeline points to more of the same.
Chowhan estimates that IPOs, QIPs, and block deals could absorb 40-50% of available capital in the near term, a direct constraint on how much fresh money is left to lift the broader market.
Also Read: 14 IPOs List This Week—Most Came From Last Week’s Rush
The Structural Counter-Narrative: SEBI’s Long View
Zoom out, and the picture looks different. In a February address at the Kotak Investor Conference, SEBI Chairman Tuhin Kanta Pandey laid out how much India’s capital markets have scaled over the past decade:
| Metric | Then | Now |
|---|---|---|
| Total capital raised (equity + debt) | — | ₹105 trillion (FY16-FY26 till Jan) |
| IPO fundraising, FY26 (Apr-Jan) | ₹1.7 trillion via 320 IPOs (FY25) | ₹1.8 trillion via 329 IPOs |
| FPI equity assets under custody | ₹19 trillion (FY16) | ₹71 trillion (Jan 2026) |
| Mutual fund AUM | ₹12 trillion (FY16) | ₹81 trillion |
| Corporate bond market | — | ₹58.2 trillion (12% CAGR since FY15) |
| Unique investors | — | 140 million+ |
Pandey also cited MSCI India’s roughly 9% CAGR in dollar terms over six years, ahead of the 6% CAGR for MSCI Emerging Markets, a data point that cuts against 2026’s near-term underperformance. His speech credited reforms, including the SWAGAT-FI framework for foreign investors, the closing auction session, and a higher 40% anchor investor allocation for building this depth.
Where Abakkus Sees Value
Abakkus is positioning around leading niche NBFCs and mid-sized banking stocks, citing stronger credit growth in those pockets.
The firm expects foreign investors to return to Indian equities only gradually. Chowhan noted that years of weak returns in financials and IT have left FPIs cautious about adding exposure back too quickly, even as the last two months show the beginnings of a shift.
What This Means Going Forward
This is a timing mismatch, not a contradiction. SEBI’s data shows a market that has structurally deepened over a decade, with more investors, more capital formation, and more product diversity. Abakkus’s caution is about the next two to three quarters, where a crowded IPO calendar and global risk sentiment will likely matter more than the structural story.
August’s buying streak is the first real test of whether that near-term caution is starting to fade; whether it continues into September, alongside how quickly the IPO pipeline thins out, will likely decide if Nifty’s earnings case finally starts showing up in the price.
📊 Track daily foreign and domestic institutional activity on NiftyTrader’s FII-DII Data page.
Read Next: FIIs Sold ₹7,986 Crore in August. So Why Does Another Data Set Show Buying?
FAQs
Q1. Why are Nifty and Sensex down in 2026 despite strong earnings?
Abakkus attributes it to external pressures, global risk aversion, elevated crude prices, and rising global bond yields, layered on top of heavy domestic IPO/QIP supply, rather than weak fundamentals.
Q2. Have foreign investors stopped selling Indian equities?
Not entirely. FPIs turned net buyers in July and August; their best monthly inflow since September 2024 came in August, but they remain net sellers of about ₹2.23 lakh crore for 2026 overall.
Q3. How much is the IPO pipeline affecting secondary market liquidity?
Abakkus estimates 40-50% of available capital could be absorbed by IPOs, QIPs, and block deals in the near term, based on 27 mainboard IPOs raising ₹22,572 crore in H1 2026 alone.
Q4. What does SEBI’s data say about India’s capital market growth?
SEBI Chairman Tuhin Kanta Pandey noted in February that FPI equity assets under custody have grown over three-fold to ₹71 trillion since FY16, alongside mutual fund AUM rising to ₹81 trillion.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. NiftyTrader.in is a SEBI-registered platform. Readers should consult a registered financial advisor before making investment decisions. Data cited is sourced from Reuters, Business Standard/NSDL data, and SEBI Chairman Tuhin Kanta Pandey’s address at the Kotak Investor Conference (February 25, 2026), as of September 1, 2026.
