₹46,000 Crore in 19 Days: Will US-China trade truce shift FII focus from India?

Foreign Institutional Investors (FIIs) have pumped in a massive ₹46,003.66 crore into Indian equities over the last 19 sessions, acting as key market movers. But with the US and China striking a surprise trade truce, could this surge in FII inflows start to fade?

US-China Deal: A Game Changer?

On Monday, the US and China agreed to reduce tariffs on each other’s goods for 90 days, offering temporary relief to global markets. This has prompted analysts at Nomura to revise their view on Chinese stocks to a ‘tactical overweight,’ sparking speculation that FIIs might redirect capital from India to China.

What Happened Earlier This Year

In January, FIIs were heavy sellers in India, pulling out ₹78,027 crore, especially as the US dollar index peaked at 111. But by April, they returned, investing ₹4,243 crore, signaling a shift in sentiment driven by both global and local factors.

Are FIIs Still in Control?

While domestic investors—mutual funds, insurance firms, and retail participants—are gaining strength, FIIs continue to influence large-cap stocks and overall market trends. Prashanth Tapse, Senior VP at Mehta Equities, emphasized that FII flows still carry significant weight, even if they aren't the sole drivers anymore.

New Macro Landscape

With the US-China trade tension easing and the US 10-year bond yield climbing to 4.47%, the environment that previously favored Indian equities could be shifting. Dr. VK Vijayakumar of Geojit Investments warns that the current FII buying spree might not last under the new global dynamics, especially with a stronger dollar and better prospects for the Chinese economy.

Domestic Strength is India’s Buffer

Despite global uncertainty, strong domestic flows remain a pillar of stability. Monthly SIPs have touched record highs of over ₹25,000 crore, providing consistent liquidity. Moreover, expectations of three more rate cuts by India’s Monetary Policy Committee (MPC), thanks to easing inflation, could support market resilience.

What Drives FIIs in Emerging Markets?

Several factors guide FII decisions:

Valuations

US Fed interest rate policy

Dollar index movements

Geopolitical tensions

Volatility in commodities and gold

“The Indian equity market has evolved,” said Tapse, noting that FIIs are now part of a broader, more balanced investment ecosystem, thanks to the rise of domestic investors.

The Bottom Line

While FIIs may get tempted by improving prospects in China, India’s robust domestic participation and stable macro indicators could keep its stock market attractive. For now, the tide of foreign money continues, but investors should watch global cues closely.

Disclaimer: The views mentioned are those of individual analysts and experts. Please consult with a certified financial advisor before making investment decisions.