Foreign investors have injected nearly Rs 31,000 crore into Indian equity markets in the last six trading sessions of March, according to the latest depository data.
This surge in investment is mainly due to attractive stock valuations, the strengthening of the rupee, and improving macroeconomic indicators.
The return of foreign portfolio investors (FPIs) as buyers has helped the stock market recover significantly.
The benchmark Nifty index has risen by about 6 per cent during this period, reflecting renewed confidence among investors.
The change in FPI strategy, from selling to buying, is influenced by several factors. These include a 16 per cent correction in stock prices since the September 2024 peak, the recent appreciation of the rupee, and strong economic indicators like GDP growth, industrial production, and inflation.
This fresh inflow of funds has also reduced the overall outflow for March to Rs 3,973 crore, according to depository data.
Experts believe that future FPI investments will depend on the outcome of the reciprocal tariffs expected to be announced by US President Donald Trump on April 2.
If the tariffs are not too harsh, the market rally could continue, experts noted.
"Turning the tide this week, FPI inflows have started in green, bringing back the cheer in the Indian market despite the last week of the financial year, which usually witnesses substantial profit booking," Manoj Purohit of BDO India said.
He added that some of the primary reasons on the macroeconomic front had been the United States' making announcements for the imposition of reciprocal tariffs, ongoing military tension in the Middle East, rising inflation, low consumption, and higher valuations.
Additionally, a key decision by the Securities and Exchange Board of India (SEBI) has encouraged FPIs to invest.
The SEBI decided to increase the threshold for granular beneficial ownership disclosures from Rs 25,000 crore to Rs 50,000 crore.
"FPIs having more than 50 per cent of their portfolio in a single corporate group will continue to abide by the earlier limit. Hopefully, this will bring back the much-needed volume in trades and liquidity in the market," Purohit said.
This decision was made after discussions with major banks regarding restrictions on participatory notes (P-Notes) trading volume.
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