India's equity markets could continue to benefit from improving liquidity conditions, with resilient domestic inflows, a recovery in foreign investor sentiment and an expected revival in primary market activity creating a supportive backdrop, according to Aditya Suresh, India Strategist at Macquarie.
In his latest India strategy note, Suresh said local liquidity continues to remain resilient at around $4 billion every month, with mid-cap stocks attracting the highest traction across market segments.
Macquarie noted that domestic mutual fund inflows have remained robust despite bouts of market volatility, with investors continuing to favour mid-cap and flexi-cap schemes. That steady stream of retail money has helped cushion Indian equities even as foreign institutional investors (FIIs) recorded heavy outflows during the first half of 2026.
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According to Macquarie, the foreign flow picture is beginning to improve. The brokerage said that foreign investor sentiment has shifted from bearish to neutral, with mild inflows returning in July after record outflows in the first six months of the year.
While it is too early to call a sustained reversal, the shift suggests overseas investors are becoming less cautious on Indian equities.
Another theme highlighted is the expected revival in primary market activity. After a relatively subdued year for equity issuances, he expects large offerings — including those from Jio, the National Stock Exchange (NSE) and other issuers — to gather momentum over the coming months. Those deals are likely to absorb part of the abundant liquidity in the financial system while also providing investors with fresh investment opportunities.
Although valuations remain elevated in parts of the market, particularly among mid-cap stocks, he argues that liquidity continues to be a key support for equities.
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