After the massive selling at the beginning of the year amid global geopolitical and trade tariff-related uncertainties, foreign institutional investors seem to be slowly and steadily returning to the Indian markets.
Data from NSDL shows that foreign portfolio investors (FPIs) sold shares worth around $13.4 billion in the first three months of 2025. However, they were net buyers to the tune of around $510 million in April and in just the first 12 days of May, they bought $1.68 billion in stocks.
Cumulatively, they are still net sellers worth $11 billion crore in Indian equity. But, as data indicates, their interest seems to be rising once again.
"The hallmark of FPI investment in recent days has been the sustained buying by FIIs. FIIs bought equity through the exchanges consecutively for 16 trading days ending May 8 for a cumulative amount of Rs 48,533 crore. They sold for Rs 3,798 crore on May 9 when the India-Pakistan conflict escalated. Now that ceasefire has been declared, FIIs are likely to resume their equity purchases in India," noted V.K. Vijayakumar, chief investment strategist at Geojit Investments.
At the beginning of the year, there was a massive move away from emerging market equities as the overall global economic outlook was looking uncertain amid the trade tensions fuelled by President Trump's reciprocal tariff threat and the strengthening of the US dollar against major currencies.
Now, on the one hand, the dollar is declining and there are worries of the US as well as Chinese economy slowing. On the other hand, India remains among the fastest-growing large economies, the inflation is cooling and interest rates are also coming down. This changing macro will make India look attractive for FII investments.
While FIIs have been steadily increasing their investments in recent months, domestic investors have been net buyers. Equity-oriented schemes of mutual funds saw inflows of Rs 24,269 crore in April. Overall, domestic institutional investors were net buyers to the tune of $3.3 billion in April 2025.
With DIIs continuing to buy and FIIs turning net buyers, the BSE Sensex has risen 7.4 per cent over the past month, recovering some of the losses it saw since October 2024. The midcap and smallcap indices are also up 5.4 per cent and 3 per cent respectively.
While FIIs have begun upping their Indian equity investments, they have been very selective on where they are channeling their funds. For instance, banking, financial services and insurance sector saw inflows of $2.2 billion in April, in addition to the $1.7 billion inflows in March, pointed out analysts at JM Financial Institutional Services.
Elsewhere, the telecom sector saw FII inflows of $544 million, and they invested $343 million in fast-moving consumer goods companies, last month. Chemicals and power too saw FII inflows upwards of $100 million.
At the same time, FIIs have been big sellers in certain sectors. They offloaded $1.8 billion worth investments in the IT sector. India's top software companies had a lackluster fourth quarter, with several companies reporting a quarter-on-quarter decline in revenue and their outlook remains subdued too, given the expected slowdown in the US, their biggest market. The BSE IT index is down over 13 per cent index so far in 2025, vastly underperforming the broader market (the Sensex is up 5.5 per cent so far in 2025).
Metals and automobile sectors too saw sizeable FII outflows of $398 million and $375 million respectively in April.
Still, BFSI, IT, oil and gas, auto and pharma remain the top five sectors where FIIs held equity in India, according to JM Financial. These five sectors alone account for 60 per cent of FII assets in India, the analysts added.
