In the last nine trading sessions, Indian markets have witnessed a remarkable surge in activity from foreign institutional investors (FIIs), with purchases surpassing ₹34,000 crore. This notable buying spree represents the longest continuous influx of foreign investments since September 2024, showcasing a renewed confidence in Indian equities.

Reasons Behind FII Activity in Indian Markets

The timing of this surge is particularly intriguing, especially amidst the backdrop of rising tensions between India and Pakistan following recent incidents. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, pointed out that "this shift in FII strategy is occurring during a period marked by significant geopolitical concerns, notably the fallout from the Pahalgam terror attacks."

Despite these tensions, analysts identify two primary factors driving FII interest in India.

• Resilience Amid Global Uncertainty: India’s economic performance remains robust even as global markets face challenges.
• Weakening Dollar: The declining value of the dollar is influencing investment decisions favorably towards Indian markets.

The Impact of Dollar Weakness

The dollar has recently been fluctuating around the 99 mark, following signals from U.S. Treasury Secretary Bessent about advancing trade negotiations with various Asian nations. Manoj Purohit, a partner and leader at BDO India, noted, "Foreign investors have returned to Indian equities, becoming net buyers over the past fortnight. This shift is largely due to a weakening dollar and renewed optimism about India’s economic prospects."

Dr. Vijayakumar added, "The dollar’s recent decline from a peak of 111 in January has reversed the momentum that favored U.S. equities. Additionally, expectations of reduced growth in the U.S. will negatively affect corporate earnings there, while India is projected to achieve over 6% growth, alongside a rebound in corporate profits."

India’s Economic Outlook

Against a challenging global backdrop, characterized by sluggish growth in major economies like the U.S. and China, India is projected to deliver a 6% GDP growth, making it a standout destination for investors. According to the IMF, "India remains the fastest-growing economy, which enhances its appeal for global investors."

Anticipation Surrounding Trade Talks

Recent comments from U.S. Treasury Secretary Scott Bessent suggest that one of the first agreements to avoid tariffs could be made with India. This has undoubtedly buoyed market sentiment. Purohit emphasized, "FPI inflows are likely to remain strong in the short term, bolstering the ongoing market rally. As global investors reassess their strategies, India’s economic fundamentals position it as a stable and growth-oriented market amid global turmoil."

As negotiations on tariff agreements progress, all eyes will be on India’s approach, which could significantly influence upcoming trading cycles in the weeks ahead.

In summary, the current FII activity highlights a blend of strategic optimism and economic resilience that positions India favorably in the global investment landscape.