Foreign investors injected almost ₹31,000 crore into Indian equity markets during the past six trading days of March, the latest data from depositories show.
This investment upsurge is due to a number of factors, such as favorable stock prices, a rising rupee, and encouraging macroeconomic trends. The renewed interest in buying by foreign portfolio investors (FPIs) has been a key factor in improving market sentiment, resulting in a sharp rebound in equities.
The benchmark Nifty index has risen about 6% during this time, indicating rising investor confidence.
Shift in FPI approach—from buying to selling—has been prompted by various factors. These are the 16% correction in equities from the September 2024 high, recent rupee appreciation, and robust economic trends like GDP growth, industrial output, and checked inflation levels.
Due to this new flurry of investments, the net FPI outflow for March narrowed to ₹3,973 crore, according to depository figures.
In the future, market analysts say that the direction of FPI inflows will heavily be influenced by the impending announcement of reciprocal tariffs by US President Donald Trump on April 2. If the tariffs are not as bad as feared, the current market rally may continue.
"FPIs have turned the tide this week, bringing much-needed optimism back to Indian markets. This is noteworthy especially as the last week of the financial year typically sees substantial profit booking," said Manoj Purohit of BDO India.
He went on to point out that macroeconomic uncertainties such as possible US tariff action, Middle East geopolitical tensions, inflation, muted consumption, and elevated valuations continue to be concerns for investors.
The other important driver of FPI confidence is a recent move by the Securities and Exchange Board of India (SEBI). The regulator has increased the threshold for granular beneficial ownership disclosures to ₹50,000 crore from ₹25,000 crore.
"FPIs with over 50% of their portfolio concentrated in a single corporate group will still adhere to the earlier threshold. However, this regulatory adjustment is expected to boost trading volumes and enhance market liquidity," Purohit explained.
SEBI’s move follows discussions with major banks over limitations on participatory notes (P-Notes) trading volumes, signaling a broader effort to create a more investor-friendly market environment.
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