After nearly three months of relentless selling, Foreign Portfolio Investors (FPIs) have this past week moderated their outflows from Indian equities, contributing to a sharp rebound in the stock markets. Depository data shows that FPI equity outflows narrowed to ₹31,719 crore for the month through March 21, compared to ₹30,016 crore as of March 13.
This selective re-entry by FPIs coincided with growing optimism over a potential de-escalation in the Russia-Ukraine conflict and a dovish stance from the U.S. Federal Reserve, which hinted at two rate cuts this year. These factors fuelled Indian equities to their best weekly performance in four years, with benchmark indices Nifty50 and Sensex rallying sharply.
FPI Buying Boosts Market Sentiment
FPIs turned net buyers of Indian equities in three of the past five trading sessions, including a single-day high of nearly ₹7,500 crore on Friday—2025’s highest daily net inflow. This shift helped break a 14-week streak of continuous FPI outflows.
The Sensex surged over 3,000 points in the last five sessions, while investor wealth expanded by ₹22 lakh crore. The Nifty50, which had declined 16 percent from its all-time high over the past six months, rebounded by 6 percent from its recent lows.
Despite this uptrend, market experts remain cautious about the sustainability of the rally. The upcoming rollout of the U.S. government’s ‘Reciprocal Tariff’ regime on April 2 is seen as a potential risk factor that could impact investor sentiment.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted a visible shift in FPI strategy. “The recent reversal in FPI selling has lifted market sentiment, fuelling this week’s rally. Positive domestic fundamentals, including improving economic growth and declining inflation, coupled with a weaker U.S. dollar, have contributed to this shift,” he said.
Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment, also highlighted a noticeable moderation in FPI selling pressure. “Investor sentiment has improved with easing global concerns. Additionally, India’s better-than-expected trade deficit and China’s stimulus-driven consumption boost have further supported equities,” he said.
Srivastava added that the softening of the U.S. dollar index and expectations of a Fed rate cut have encouraged foreign fund flows back into emerging markets like India. However, he cautioned that FPIs remain cautious, awaiting further clarity on the Fed’s monetary policy path, geopolitical risks, and outlook on India’s domestic economic trajectory.
FPIs Bullish on Debt Markets Too
Alongside equities, FPIs have also turned bullish on Indian debt markets, significantly increasing their investments. As of March 21, FPIs pumped in ₹36,750 crore into debt markets this month, up from ₹23,703 crore as of March 13.
A large portion of these inflows was directed toward government securities under the Fully Accessible Route (FAR), with net inflows reaching ₹25,969 crore—the highest for any month in 2025.
Market participants have already priced in a 25-basis-point rate cut by the Reserve Bank of India (RBI) in April 9 meeting following softer inflation data. Now, foreign banks and research firms anticipate another 25-basis-point cut by the RBI’s Monetary Policy Committee (MPC) in June.
Reflecting these expectations, the 10-year government bond yield saw its steepest weekly decline since November 2024, dropping by 8 basis points to 6.62 percent this past week.
Cautious Optimism Prevails
While the recent moderation in FPI selling has offered some respite to Indian equities, analysts believe sustained inflows will depend on multiple factors, including global risk sentiment, US monetary policy, and domestic economic indicators.
With the US expected to announce new trade policies in early April and FPIs still navigating macroeconomic uncertainties, markets are likely to remain volatile in the near term. However, if positive domestic trends persist, India could continue attracting foreign capital in both equity and debt markets, they said.
