After a prolonged period of heavy selling, foreign portfolio investors (FPIs) made a surprising comeback as net buyers in the last week of March. However, this surge was short-lived; by April, they reversed course, withdrawing a staggering ₹32,121 crore from Indian equities in just seven trading sessions. This significant pullback was primarily fueled by rising global trade tensions, which instilled a risk-averse mindset among investors.
FPI Activity and Market Trends
From March 20 to March 27, FPIs had infused ₹32,576 crore into Indian equities, reducing the overall outflow for March to ₹3,973 crore, according to depository statistics. In contrast, February witnessed a withdrawal of ₹34,574 crore, while January saw an even larger outflow of ₹78,027 crore. The period between October 2024 and February 2025 marked a significant decline, with FPIs pulling out over ₹3 lakh crore from the Indian stock market, largely driven by concerns regarding high valuations and disappointing corporate earnings.
- March 2025 FPI Inflows: ₹32,576 crore
- February 2025 Outflows: ₹34,574 crore
- January 2025 Outflows: ₹78,027 crore
Domestic Investors Step In
Despite the significant withdrawals from overseas investors, strong domestic inflows have helped stabilize Indian benchmark indices, keeping them resilient compared to several Asian markets, some of which have entered bear market territory. Domestic institutional investors (DIIs) purchased stocks worth approximately ₹34,000 crore in the secondary market, indicating robust local market confidence. As of March 2025, FPIs still hold 16.8% of Indian equities, with their equity Assets Under Custody (AUC) reaching ₹66.8 trillion, a 7% increase from ₹62.4 trillion in February.
New Disclosure Norms for FPIs
In a notable regulatory update, the Securities and Exchange Board of India (Sebi) has relaxed the disclosure requirements for FPIs, raising the asset threshold for making detailed beneficial ownership disclosures from ₹25,000 crore to ₹50,000 crore. This adjustment reflects the expanding size of the market. FPIs that meet the new threshold must now disclose ownership details comprehensively.
- New Disclosure Threshold: ₹50,000 crore
- Previous Disclosure Threshold: ₹25,000 crore
RBI Investment Limits Remain Steady
In early April, the Reserve Bank of India (RBI) confirmed that the limits for FPI investments in government securities, state government securities, and corporate bonds would remain unchanged for FY2025–26. The limits are set at 6%, 2%, and 15%, respectively, ensuring a consistent investment landscape for FPIs.
Market Reactions to US Tariff Developments
On April 11, the Indian stock market experienced a notable rally, with both benchmark indices surging by 2.4% during trading hours. This upswing followed the announcement from U.S. President Donald Trump regarding a 90-day pause on reciprocal tariffs for many nations, including India, that have not retaliated against the U.S. However, experts from Kotak Institutional Equities caution that while this move is positive, it does not alter the strategic goals of the U.S., which could lead to ongoing uncertainties for exporters and companies alike.
- U.S. Tariff Pause Duration: 90 days
- Impact on Indian Markets: Modest upside anticipated
While the Indian stock market has shown resilience compared to global peers, Kotak maintains a cautious outlook, pointing to fair-to-expensive valuations and persistent uncertainties surrounding global trade dynamics. As the situation evolves, investors are urged to stay informed and prepared for potential market fluctuations.
