Following two months of persistent selling, Foreign Institutional Investors (FIIs) have made a significant comeback as net buyers of Indian equities in March, as per the latest data released by the National Securities Depository Limited (NSDL).
This renewed confidence in Indian equities comes against the backdrop of increasing speculation of the Reserve Bank of India (RBI) cutting interest rates in the near future. Encouraging sentiments are also fuelled by encouraging stock valuations and recent suggestions from the U.S. Federal Reserve of impending rate cuts later in 2025.
Until March 26, FIIs were defensive as they sold shares to the tune of almost ₹67 crore. But on March 27, there was a dramatic change as they invested ₹11,111 crore into Indian equities. Domestic Institutional Investors (DIIs) also exhibited high buying interest on that day, putting in another ₹2,517 crore.
This is the first significant net FII inflow since December 2024, when foreign investors had also raised their positions in Indian markets. Interestingly, the peak FII activity this year was witnessed on March 21, with net buying of ₹7,470.36 crore.
Earlier this month, FIIs had offloaded more than ₹22,000 crore worth of stocks, as part of a sell-off trend that started in October 2024. Together, foreign investors have pulled out nearly ₹2.19 lakh crore from Indian equities during the last five months.
Sentiment now seems to be shifting more positively. Market observers chalk up this switch to the expected relaxation of interest rates by both the RBI and the US Fed—steps that could increase global liquidity and risk appetite.
Another factor is passive fund inflows triggered by Nifty index composition changes. In addition, Indian markets have gained from recent RBI liquidity policy, lower stock prices, which became more attractive after a correction, and softer returns on U.S. and Chinese equity markets.
Analysts opine that FII participation will depend on the global investment mood and relative Indian stock prices. They also forecast a possible near-term rally after April 2, as trade-related issues, including fears of reciprocal tariffs, start alleviating.
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