Foreign portfolio investors (FPIs) have brought in ₹14,167 crore into Indian equities so far in May 2025, reflecting renewed confidence in India’s economic outlook despite ongoing tensions with Pakistan. This inflow follows a turnaround seen in April, where FPIs invested ₹4,223 crore — the first net inflow after three consecutive months of outflows.
Recovery After a Period of Heavy Withdrawals
Prior to April’s reversal, FPIs had withdrawn significant capital from the Indian market — ₹3,973 crore in March, ₹34,574 crore in February, and ₹78,027 crore in January. With the May inflow, the cumulative net outflow for 2025 has been reduced to ₹98,184 crore.
Key Drivers Behind the Positive Momentum
Experts attribute the current FPI inflow trend to several global and domestic factors.
- VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, cited declining US dollar strength, slowing US and Chinese economies, and India’s robust GDP growth, combined with falling inflation and interest rates, as reasons for continued FPI interest in equities.
- He also noted that FPIs had been net buyers on the Indian exchanges for 16 consecutive trading days until May 8, amounting to ₹48,533 crore. However, they turned sellers on May 9, pulling out ₹3,798 crore as tensions with Pakistan escalated.
Improved Global Sentiment and Economic Indicators
According to Himanshu Srivastava, Associate Director at Morningstar Investments, the improving prospects for a US-India trade agreement, a weakening dollar, and a strengthening Indian rupee have increased the appeal of Indian assets to global investors. Strong quarterly results from major Indian companies have also helped boost investor confidence.
Mixed Signals in the Debt Market
In contrast to the equity inflows, the debt market saw a mixed performance. FPIs pulled out ₹3,725 crore from the general debt limit but invested ₹1,160 crore through the voluntary retention route.
Foreign investor activity suggests that while geopolitical concerns remain, strong economic fundamentals and favourable international trends are helping restore global investor faith in Indian markets.
