India’s FPI Inflows Surge Last Week; Drive Market Recovery Amid Global Uncertainty

 

The Indian equity markets have experienced a significant resurgence in Foreign Portfolio Investment (FPI) activity during the last six trading sessions of this month, with the net FPI inflows reaching approximately Rs 31,000 crore. This substantial increase in the FPI inflows in the terminal month of the current financial year has significantly mitigated the overall FPI outflow for the month, reducing it to just Rs 3,973 crore, according to the latest data from depositories. This dramatic shift from sustained selling to renewed buying represents a significant turnaround, especially when contrasted with the substantial withdrawals of Rs 34,574 crore in February and Rs 78,027 crore in January this year that led to significant market correction this year.

 

Several factors have contributed to this renewed FPI investment. Primarily, the attractive valuations of Indian equities, following a 16 percent market correction from the peak witnessed in September last year, have drawn foreign investors back to Indian markets. The recent appreciation of the Indian Rupee against major global currencies has further strengthened the attractiveness of Indian assets for foreign investors that had played a crucial role in taking Indian markets to an all time high in September last year.Moreover, positive macroeconomic indicators, such as robust GDP growth, encouraging Index of Industrial Production (IIP) numbers, and a moderation in India’s retail inflation, have boosted the foreign investor sentiment in Indian markets. Notably, the re-emergence of FPIs as net buyers has played a crucial role in the smart recovery of the benchmark Nifty index, which has rebounded by approximately 6 percent, signaling renewed market confidence.

 

These increased inflows reflect a tactical shift in Foreign Portfolio Investment strategy, particularly with regard to their investment in India which is influenced by a variety of economic and market factors. Moreover, recent regulatory changes implemented by the Securities and Exchange Board of India (SEBI) have also contributed to this positive sentiment. Notably, Indian Stock Market Regulator's decision to increase the threshold for granular beneficial ownership disclosures for Participatory Notes (P-Notes) from Rs 25,000 crore to Rs 50,000 crore has been well-received by the Foreign Portfolio Investor community. This adjustment, made in response to concerns raised by major banks regarding trading volume restrictions, has provided a more conducive environment for Foreign Portfolio Investments. Market Pundits highlight the positive impact of these regulatory changes, emphasizing its role in increased FPI participation in Indian equities.

 

However, the broader financial year 2024-25 developments still show significant volatility in Foreign Portfolio Investments. While initial FPI inflows were strong, driven by India's robust economic growth and favorable market conditions, a substantial outflow of approximately $15 billion occurred between April 1, 2024, and March 27, 2025. This marked the highest-ever recorded FPI outflow out of India. This major shift in the FPI investment pattern was attributed to concerns over slowing corporate earnings, which decelerated due to weakening urban demand and modest income increases. Additionally, global trade tensions and uncertainties surrounding U.S. economic policies prompted investors to reallocate capital to the markets perceived safer by them.

 

The interplay of these factors, such as initial optimism driven by India's strong economic performance, followed by the subsequent concerns that triggered the significant outflows, is driving the market sentiments. FPI inflows boost m-cap of top companies As a result of renewed FPI investment in India’s equities market a positive momentum was created last week. It reflected a significant increase in the combined market capitalization (m-cap) of eight of the top-10 most-valued firms, which surged by Rs 88,085.89 crore last week, reflecting the optimistic trend in equities. HDFC Bank led the gains, with its valuation increasing by Rs 44,933.62 crore to Rs 13,99,208.73 crore. Other significant gainers included State Bank of India (Rs 16,599.79 crore increase), Tata Consultancy Services (TCS) (Rs 9,063.31 crore increase), and ICICI Bank (Rs 5,140.15 crore increase). ITC also saw an increase of Rs 5,032.59 crore, and Hindustan Unilever’s market cap climbed to Rs 2,796.01 crore. As against this, Mukesh Ambani led Reliance Industries and India’s IT giant Infosys experienced declines in their market valuations.