FIIs invest ₹14,670 Cr in just 3 days: What's behind the shift?

Foreign institutional investors (FIIs) have made a strong return to the Indian stock market, investing ₹14,670 crore over a span of three days (April 15-17, 2025). This notable surge in FII activity highlights a shift in investor sentiment, signaling renewed optimism in India's equity market amidst changing global and domestic conditions.

Despite a period of selling during the first half of April, where FIIs offloaded ₹23,999 crore worth of shares, the recent inflow marks a significant reversal. Experts attribute this turnaround to several global and domestic factors.

Key Drivers of the FII Comeback

Declining US Dollar

According to Prashanth Tapse, Senior Vice President of Research at Mehta Equities, one of the key reasons for this influx is the weakening US Dollar Index, which now stands around 100. With expectations of further depreciation, investors are increasingly turning to India, which offers better risk-adjusted returns. Low inflation, stable crude prices, and strong Q4FY25 earnings, particularly from the banking sector, have made India an attractive destination.

Improved Global Trade Conditions

The postponement of US tariffs by 90 days has eased global trade tensions, providing a favorable environment for foreign investors. While market volatility remains, experts believe that if the Nifty index manages to close above its 200-day moving average (DMA) at 20,050, the market could experience continued upward momentum.

India's Growth Prospects

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, highlights that the lackluster growth expected from the US and China is making India’s growth outlook even more appealing. With projections indicating a 6% growth rate for India in FY26, foreign investors are betting on India's resilience in the face of global economic challenges.

Optimism Surrounding Q4FY25 Earnings

Despite concerns over muted corporate earnings in Q4, there is cautious optimism due to recent interest rate cuts by the Reserve Bank of India (RBI). The expectation of further rate cuts in the coming months could lower borrowing costs, stimulate credit off-take, and potentially revive corporate growth in the upcoming quarters.

FPI Activity and Market Outlook

Foreign portfolio investors (FPIs) turned net buyers on April 15, marking the end of a nine-day selling streak that saw ₹38,992 crore in outflows. This marked a sharp shift from earlier in the month when FPIs had been net sellers. The relaxation of US tariffs and a potential global trade agreement have also contributed to this positive shift in sentiment.

From February to March 2025, FPIs had pulled out over ₹3 lakh crore from the Indian market, largely due to concerns over high valuations and disappointing earnings. However, the latest data suggests that foreign investors are now looking to India for better returns.

Looking Ahead

As global conditions improve and India's economic fundamentals remain strong, experts believe that FIIs could continue to show confidence in Indian markets. If technical indicators align with positive market fundamentals, a broader rally driven by institutional buying could be on the horizon.

Conclusion

The combination of a weaker US dollar, improved global trade conditions, India’s strong growth outlook, and the RBI’s accommodative stance on interest rates has created an attractive environment for foreign investors. As a result, the Indian stock market could see sustained FII inflows, signaling a positive outlook for the coming months.