In an impressive show of confidence, foreign institutional investors (FIIs) have significantly increased their presence in the Indian cash market, investing a remarkable ₹14,670 crore over just three trading days from April 15 to 17. This surge reflects a revitalized optimism among foreign investors towards the Indian equity market, even as global and domestic economic signals shift. The influx of foreign capital not only boosts market sentiment but also raises hopes for sustained growth in the upcoming weeks.

A Shift in Foreign Investment Trends

Despite earlier sell-offs in April, where FIIs offloaded shares worth ₹23,999 crore by April 19, a notable change occurred during the last three trading sessions. According to Prashanth Tapse, Senior Vice President of Research at Mehta Equities, this recent surge indicates a healthy rebound in FII activity, driven by both global circumstances and domestic economic factors.

• Declining US Dollar: Tapse pointed out that the US Dollar Index has dropped to around 100, prompting investors to seek better risk-adjusted returns in India. With lower inflation, stable crude oil prices, and better-than-expected earnings from the banking sector for Q4 FY25, India is becoming increasingly attractive.

• Improved Global Trade Relations: The recent postponement of US tariffs by 90 days has alleviated some global trade tensions, contributing to market optimism. Tapse noted that if the market can close above the 200-day moving average (DMA) resistance level of 20,050, it may signal further upward momentum.

Economic Growth and Market Performance

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, emphasized that the anticipated sluggish growth in both the US and China could enhance India’s relative market performance. India is projected to achieve a robust 6% growth rate in FY 26, which positions it favorably against other emerging markets.

• Sectors to Watch: Investment interest is expected to focus on domestic consumption themes such as:
  • Financial services
  • Telecommunications
  • Aviation
  • Cement production
  • Select automobile stocks
  • Healthcare

Earnings Outlook and Market Sentiment

As the quarter progresses, investors are approaching earnings reports with a mix of caution and optimism. Mohit Gulati, CIO and Managing Partner at ITI Growth Opportunities Fund, remarked that recent interest rate cuts by the Reserve Bank of India (RBI), along with expectations for further reductions, could lower borrowing costs and stimulate credit growth. This monetary easing is seen as a potential catalyst for revitalizing corporate profits in the coming quarters.

Recent FPI Activity

On April 15, FIIs became net buyers, infusing ₹6,065 crore into the Indian stock market, ending a nine-day streak of selling that saw outflows totaling ₹38,992 crore. This shift marks a significant turnaround from earlier months, where FIIs had withdrawn substantial amounts due to concerns over inflated valuations and disappointing earnings.

Future Prospects for FII Investments

Looking ahead, market analysts are optimistic about the potential for continued FII inflows into the Indian markets. Tapse suggests that favorable global conditions, stable domestic fundamentals, and improving corporate earnings create an environment ripe for sustained investment. If the market can align technical levels with positive fundamentals, a broader rally supported by institutional buying could be on the horizon.

In summary, as foreign institutional investors re-engage with the Indian market, the combination of declining global uncertainties and robust domestic growth prospects may pave the way for a promising investment climate.