India poised for foreign portfolio inflows as AI trade cools

A roughly 5% drop in the U.S. Nasdaq is being interpreted as a sign that the AI investment boom may be waning. Analysts say a cooling of AI‑related trading could reverse a wave of foreign portfolio investor (FPI) outflows from Indian equities.

In May, FPIs sold a net ₹32,963 crore of Indian stocks, and continued selling in early June added another ₹42,926 crore, taking cumulative 2026 sales to about ₹283,662 crore according to NSDL data. To mitigate the impact on the current‑account deficit and balance‑of‑payments gap, the Reserve Bank of India and the government have introduced measures such as tax exemptions on interest and capital gains for FPI holdings in government securities, RBI absorption of hedging costs on FCNR deposits, an expanded forex‑swap window, greater access to government bonds via the FAR route, and higher investment limits for NRIs and OCIs.

These steps have helped stabilise the rupee, which recovered from a low of 96.96 per dollar to around 94.94 on June 5. Analysts note early signs that AI‑driven outflows are easing, which could encourage renewed FPI inflows into Indian markets.