Foreign investors turned bullish on Indian equities last week, infusing a whopping ₹17,425 crore into domestic stocks between April 21 and April 25, 2025. This sharp uptick in foreign portfolio investments (FPI) marks a strong rebound after aggressive selling earlier this month and signals renewed confidence in India’s economic growth story.
FII Activity: A Significant Shift in Sentiment
Data from depositories reveals that FPIs made a net investment of ₹17,425 crore in Indian equities last week. This investment came after ₹8,500 crore was pumped into the markets during the previous holiday-shortened week ending April 18.
Overall, FPIs have pulled out ₹5,678 crore from Indian stocks so far in April 2025. Despite the positive flows over the past two weeks, total FPI outflows stand at ₹1.22 lakh crore since the start of this year, highlighting the scale of earlier sell-offs.
However, the tide seems to be turning. The massive buying spree witnessed recently shows that foreign investors are willing to look past short-term global uncertainties, betting instead on India’s resilient macroeconomic fundamentals and promising growth trajectory.
Global Factors Driving FPI Inflows: Dollar Weakness, Fed Pause Expectations
Globally, several key developments have played in favor of emerging markets like India:
- Stable global markets: Major international indices maintained steady gains, boosting risk appetite across the board.
- US Federal Reserve stance: With growing expectations that the Fed will hold interest rates steady for longer, global liquidity appears more supportive of emerging market assets.
- US dollar slump: The US Dollar Index (DXY) dropped to a three-year low of 97.92 on April 21, following fears over potential political interference in the US Federal Reserve and concerns about the US economy’s trajectory.
According to analysts, the weaker dollar not only makes emerging market assets more attractive but also improves risk-reward dynamics for FPIs looking to hedge currency risks.
“The dollar index has declined about 5% since early April, when President Trump shook global financial markets with his sweeping tariff announcements,” noted recent media reports. This fall has boosted flows into higher-yielding markets like India.
Moreover, the expected slowdown in US growth this year — predicted to impact American corporate earnings — further increases the relative attractiveness of Indian equities, where corporate profitability is projected to improve steadily.
Domestic Tailwinds: Resilient Growth, Falling Inflation, Monsoon Optimism
On the domestic front, multiple factors have strengthened investor confidence:
- Robust GDP growth: India’s economy is projected to grow above 6% in 2025, among the highest rates globally.
- Moderating inflation: Consumer price inflation has been trending lower, raising hopes of stable interest rates and stronger consumer demand.
- Positive monsoon forecast: An above-normal monsoon prediction for 2025 augurs well for rural demand, agricultural output, and overall economic stability.
Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Research India, pointed out that India’s resilient growth outlook, easing inflationary pressures, and strong rural fundamentals have created a highly attractive investment climate for foreign investors.
Srivastava added, “The combination of strong macro fundamentals and favorable external cues makes India a preferred destination at a time when uncertainties cloud global markets.”
Geopolitical Overhang: Temporary Pressures Early in April
The initial part of April 2025 witnessed heavy FPI outflows. This was largely triggered by global jitters over new US tariff policies and regional tensions in South Asia following the Pahalgam terror attacks.
Concerns over geopolitical instability often lead to a flight of capital from emerging markets. However, the recent reversal suggests that investors now view these events as short-term hiccups rather than fundamental threats to India’s economic story.
“Markets are increasingly looking through temporary geopolitical shocks and focusing more on long-term fundamentals,” said a Mumbai-based fund manager.
Analyst Views: Recovery in Corporate Earnings Could Drive Next Leg of Rally
Another crucial driver behind the optimism is the expectation of a turnaround in corporate earnings.
In a recent conversation with Upstox, Rahul Singh, Chief Investment Officer – Equities at Tata Asset Management, highlighted the upcoming catalysts for earnings recovery. According to Singh:
- Lower interest rates will ease borrowing costs for businesses and consumers.
- Easier liquidity conditions will support capital expenditures and consumer spending.
- Rising retail credit growth indicates a strengthening financial sector.
- Increased government spending on infrastructure and rural schemes will drive economic activity.
- Potential personal income tax cuts may boost disposable income and consumption.
Singh believes these tailwinds will start reflecting meaningfully in corporate earnings from the first half of FY26, setting the stage for sustained market outperformance.
Sectoral Preferences: Where Are FIIs Putting Their Money?
While broad-based buying has been visible, FPIs have shown a preference for sectors closely aligned with India’s consumption and infrastructure growth stories. Key sectors attracting flows include:
- Banking and financial services: Benefitting from rising credit demand and stable asset quality.
- Infrastructure and capital goods: Riding the government’s massive capex push.
- Consumer goods: Poised to gain from improving rural and urban consumption.
- Information technology: Selective buying based on valuation comfort despite global headwinds.
The rotation towards domestic-centric sectors reflects the belief that India’s growth will increasingly be driven by internal consumption and investment rather than export dependency.
Outlook for the Rest of 2025: Cautious Optimism with Volatility Ahead
Despite the strong inflows over the past two weeks, analysts advise caution. Volatility may remain elevated due to several factors:
- Global central bank policies: Any unexpected moves by the Fed or ECB could cause ripples.
- Geopolitical risks: Regional tensions, elections in key markets, or escalation of trade disputes could impact sentiment.
- Corporate earnings season: Disappointments on earnings or forward guidance could trigger corrections.
However, the overall outlook remains positive for Indian equities, with the macro environment expected to remain supportive through 2025.
Brokerages like Morgan Stanley and Goldman Sachs continue to maintain an “overweight” stance on Indian equities compared to other emerging markets, citing structural strengths, favorable demographics, and policy continuity.
Conclusion: India’s Strong Fundamentals Attract Foreign Capital Again
The ₹17,425 crore inflow into Indian equities between April 21-25, 2025, marks a critical shift in FPI sentiment. After months of volatility and outflows, foreign investors are re-recognizing India’s status as a high-growth, stable investment destination.
Global dollar weakness, expectations of Fed pause, India’s resilient macro fundamentals, and optimism about earnings recovery have combined to bring FPIs back into the fold. While short-term challenges remain, India’s medium- to long-term investment story continues to shine.
For investors — both domestic and foreign — the message is clear: India remains an attractive bet in a turbulent global environment, provided one is willing to ride out interim volatility.
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