Foreign Portfolio Investors (FPIs) have shown a decrease in selling pressure in the Indian equity market, with outflows narrowing to ₹1,794 crore ($194 million) last week. This marks a positive shift after 15 consecutive weeks of outflows, largely driven by easing global concerns and optimism surrounding the potential de-escalation of the Russia-Ukraine conflict.
Looking ahead, FPIs are expected to remain cautious as they await clarity on the US Federal Reserve’s interest rate plans, geopolitical developments, and India’s economic outlook. Himanshu Srivastava, Associate Director of Manager Research at Morningstar Investment, highlighted the need for a clearer picture on these fronts.
Data from depositories shows that FPIs sold equity shares worth ₹1,794 crore ($194 million) in the week ending March 21. However, there were instances of net buying by FPIs on March 21 and March 19, with significant purchases on those days.
Positive domestic factors such as improved trade deficit and Chinese consumption boost, coupled with a weaker dollar, have contributed to the recent change in FPI strategy, according to V K Vijayakumar, Chief Investment Strategist at Geojit Investment Services. Investor sentiment has improved on the back of these developments and the potential easing of global tensions.
Additionally, a softer US dollar index and expectations of rate cuts by the US Federal Reserve have prompted FPIs to re-enter emerging markets like India. The Fed’s dovish stance, hinting at possible rate cuts this year, has further encouraged foreign inflows into Indian equities.
Despite this positive shift, FPIs have withdrawn ₹31,719 crore from the market in March so far, following significant outflows in February and January. The total FPI outflows for 2025 have now reached ₹1.44 lakh crore.
On the other hand, FPI investment in debt instruments has continued, with total debt investments amounting to ₹10,955 crore in March through March 21. This indicates a preference for debt over equities amidst ongoing market volatility.
Overall, the recent developments in the global and domestic landscape have influenced FPI behavior, with cautious optimism prevailing in the market. The outlook remains uncertain, and market participants are closely monitoring various factors that could impact foreign fund flows in the coming weeks.
