After three months of net withdrawals, foreign portfolio investors (FPIs) have made a strong comeback into Indian equities, injecting ₹6,480 crore so far in October. This reversal follows significant outflows in the previous three months — ₹17,700 crore in July, ₹34,990 crore in August, and ₹23,885 crore in September — highlighting a marked shift in global investor sentiment toward India.
Factors Driving FPI Inflows
Experts attribute this renewed interest to several macroeconomic and market factors:
- Strong Macroeconomic Fundamentals: According to Himanshu Srivastava, Principal, Manager Research at Morningstar Investment Research India, “India’s macroeconomic backdrop remains relatively strong among emerging markets, with stable growth, manageable inflation, and resilient domestic demand supporting investor confidence. Global liquidity is gradually easing, prompting funds to flow back into higher-return emerging markets.”
- Attractive Valuations: Falling valuations after recent market corrections have encouraged dip-buying. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted, “India’s underperformance over the past year has created prospects for improved relative returns. The reduced valuation gap compared to other markets is driving FPI strategy shifts.”
Debt Market Participation
FPIs are also showing renewed interest in Indian debt instruments. As of October 17, about ₹5,332 crore has been invested under the general limit, with an additional ₹214 crore through the voluntary retention route, reflecting confidence in the Indian debt market alongside equities.
Summary
The return of FPIs to Indian markets after three months of withdrawals underscores renewed global investor confidence in India’s growth story. Stable macroeconomic fundamentals, attractive equity valuations, and interest in debt instruments are driving this inflow, signaling a positive sentiment shift that could support equity and debt markets in the near term.
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