FPIs Remain Hopeful Towards Indian Equities, Infuse Rs 18,620 Crore In May So Far. Here's Why

This marked a strong continuation of the buying trend that re-emerged in April, when FPIs made a net investment of Rs 4,223 crore—the first monthly inflow in three months, as per depository data.

Strong GDP growth projections, supportive monetary policy, and optimistic corporate earnings forecasts have further strengthened India’s appeal among global investors.

Source : ABPLIVE AI

Foreign portfolio investors (FPIs)  ramped up their investments in Indian equities, infusing Rs 18,620 crore so far in May. This marked a strong continuation of the buying trend that re-emerged in April, when FPIs made a net investment of Rs 4,223 crore—the first monthly inflow in three months, according to depository data.

Prior to that, the markets experienced persistent outflows, with FPIs pulling Rs 3,973 crore in March, Rs 34,574 crore in February, and a steep Rs 78,027 crore in January, reported PTI.

The positive momentum in FPI activity suggests that 'large caps will remain resilient', said V K Vijayakumar, Chief Investment Strategist at Geojit Investments. He attributed the consistent interest in Indian equities to a blend of domestic economic strength and favourable global developments.

Geopolitical and Trade Developments Fuel Renewed FPI Optimism

A significant shift in sentiment has also been shaped by geopolitical and global trade events. The ceasefire agreement between India and Pakistan has been a major turning point, easing regional tension and elevating investor morale. "The announcement of a ceasefire between India and Pakistan, which eased regional tensions, lifted investor sentiment," said Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment.

Additionally, the temporary trade truce between the United States and China  boosted global risk appetite. “The global risk appetite also improved after a 90-day tariff truce between the US and China, prompting foreign investors to reallocate capital toward emerging markets, with India being a key beneficiary,” Srivastava added.

These twin developments  created a conducive environment for increased capital inflows, a trend likely to continue in the near term. “With the global trade scenario improving after the pause in trade war between the US and China and the end of the India-Pakistan conflict, the investment scenario has improved,” Vijayakumar noted.

Domestic Strength and Regulatory Support Enhance Market Attractiveness

India's macroeconomic outlook has also played a pivotal role in drawing foreign capital. Strong GDP growth projections, supportive monetary policy, and optimistic corporate earnings forecasts have further strengthened India’s appeal among global investors.

On the debt side, however, the sentiment has been mixed. FPIs withdrew Rs 6,748 crore under the general debt limit but invested Rs 1,193 crore in the voluntary retention route (VRR) during the review period. In a bid to reinvigorate interest in the debt market, market regulator SEBI released a consultation paper last week proposing relaxations for FPIs investing in Indian government securities through the VRR and Fully Accessible Route (FAR).

"This move comes at a critical time, as foreign investors continue to adopt a cautious outlook towards Indian bond markets, especially after the inclusion of Indian government bonds in the global bond indices," said Manoj Purohit, Partner & Leader, Financial Services Tax, Tax & Regulatory Services, BDO India.

Despite the caution in the bond segment, the robust inflows into equities signal sustained optimism among global investors about India’s market potential in 2025.