After a relentless selloff since September 2024, foreign investors have resumed buying in Indian shares, ploughing $1.39 billion into equities this week alone, the highest inflow across Asian markets, data from Bloomberg has showed.
FIIs have turned net buyers of Indian equities since March 20, purchasing around $2.37 billion during this period after having sold over $28.18 billion since the end of September.
In contrast, Taiwan saw the largest outflow at $298 million, followed by Malaysia ($161 million) and Thailand ($89 million). Other Asian markets such as Vietnam, and the Philippines saw outflows worth $32 million and $64 million, respectively. Apart from India, Indonesia and South Korea too experienced net inflows, receiving $158.3 million and $118 million respectively.
The renewed FII interest follows recent liquidity measures by the Reserve Bank of India (RBI) and growing expectations of a rate cut during the upcoming MPC review, due in April – factors that have boosted investor confidence
Equity valuations too have cooled off from recent peak following the correction in Indian equities, which, along with declines in the US and Chinese markets, has made India a compelling alternative for global investors.
In response to a persistent liquidity deficit, the RBI has been infusing funds into the banking system through a range of instruments, including daily, standard, and long-term Variable Rate Repo (VRR) auctions, USD/INR buy-sell swap auctions, and Open Market Operations (OMO) involving government securities.
India’s benchmark indices have rallied strongly, with the Sensex and Nifty gaining 5.5 percent since the start of March. Broader markets outperformed, with the BSE Midcap and BSE Smallcap indices surging 9.8 percent and 11.1 percent, respectively.
Experts, however, caution that with global uncertainties persisting and signs of sectoral weakness emerging, investors may need to be more cautious in the near term.
Some analysts also warn that despite bullish momentum, the market lacks strong fundamental drivers to sustain a significant rally – especially with potential geopolitical and trade risks, such as impending reciprocal tariffs from US President Trump adding to investors’ concerns.
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