Foreign Portfolio Investors (FPIs) have shifted gears in the Indian market, transitioning from relentless selling to selective buying. This strategic move comes on the heels of a significant rebound in equities, sparked by a combination of global factors and positive domestic indicators.
The recent data from depositories reveals a notable shift in FPI behavior, with equity outflows narrowing to ₹31,719 crore for the month through March 21. This moderation in selling coincides with growing optimism surrounding the Russia-Ukraine conflict and signals from the U.S. Federal Reserve indicating possible rate cuts. These developments have injected fresh momentum into Indian equities, propelling benchmark indices Nifty50 and Sensex to their best weekly performance in four years.
**FPI Buying Boosts Market Sentiment**
In a surprising turn of events, FPIs emerged as net buyers of Indian equities during three of the past five trading sessions. Notably, a single-day high of nearly ₹7,500 crore on Friday marked the highest daily net inflow for 2025. This newfound buying spree helped break a 14-week streak of continuous FPI outflows, leading to a surge of over 3,000 points in the Sensex and a remarkable expansion of investor wealth by ₹22 lakh crore.
Despite this bullish trend, market experts remain cautious about the sustainability of the rally. The looming rollout of the U.S. government’s ‘Reciprocal Tariff’ regime on April 2 poses a potential risk that could sway investor sentiment. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasized the significance of FPI strategy in influencing market sentiment. “The recent reversal in FPI selling has lifted market sentiment, fuelling this week’s rally,” he said. Positive domestic fundamentals, such as improving economic growth and declining inflation, have played a pivotal role in this shift.
**FPIs Bullish on Debt Markets Too**
In addition to their newfound interest in equities, FPIs have also displayed a bullish stance in Indian debt markets. Investments in debt markets saw a substantial increase, with FPIs injecting ₹36,750 crore as of March 21, as opposed to ₹23,703 crore by March 13. A significant portion of these funds flowed into government securities under the Fully Accessible Route (FAR), registering net inflows of ₹25,969 crore—the highest for any month in 2025.
Market sentiment remains positive on the back of expectations for a 25-basis-point rate cut by the Reserve Bank of India (RBI) in its April 9 meeting, following softer inflation data. Foreign banks and research firms are already anticipating an additional 25-basis-point cut by the RBI’s Monetary Policy Committee (MPC) in June. Reflecting these forecasts, the 10-year government bond yield witnessed its most substantial weekly decline since November 2024, plummeting by 8 basis points to 6.62 percent this past week.
**Cautious Optimism Prevails**
As the market navigates through macroeconomic uncertainties and impending global trade policies, analysts advocate for a cautious yet optimistic outlook. The sustainability of FPI inflows hinges on various factors, including global risk sentiment, U.S. monetary policy shifts, and domestic economic indicators. While volatility may persist in the near term, continued positive trends domestically could position India as an attractive destination for foreign capital across both equity and debt markets.