Foreign Institutional Investors (FIIs) have shown a remarkable resurgence in the Indian equity market, marking a twelfth consecutive day of buying activity on Friday, with new investments amounting to ₹2,769 crore. This positive shift comes after a challenging first quarter for 2025, where FIIs had divested approximately ₹1.29 lakh crore in stocks. As market sentiment evolves, this trend suggests a renewed confidence in India’s economic prospects.

Continued Investment from FIIs

In April, FIIs turned net buyers, investing a total of ₹3,243 crore, signaling a shift in strategy. Supporting this momentum, domestic institutional investors (DIIs) also contributed significantly, making net purchases of ₹3,290 crore on May 2, according to the latest data from the NSE. This collaboration between FIIs and DIIs reflects a robust market outlook.

Factors Driving FII Interest

Experts point to several reasons behind this renewed interest from FIIs, despite ongoing geopolitical tensions between India and Pakistan:

• Global Market Recovery: The declaration by U.S. President Donald Trump for a 90-day freeze on reciprocal tariffs has invigorated global equity markets, with India outperforming many counterparts.

• US Dollar Decline: The recent drop in the Dollar Index from 111 to 99 has prompted FIIs to redirect their investments towards emerging markets like India, moving away from the previously favored U.S. markets.

• Strong Corporate Earnings: The Q4 earnings reports, particularly from the banking sector, have exceeded expectations. Combined with the Reserve Bank of India’s supportive monetary policies, this has bolstered investor confidence.

• The TINA Factor: The “There Is No Alternative” (TINA) principle continues to attract foreign investment, positioning India as a compelling option for global capital. Optimism surrounding a potential U.S.-India trade agreement further enhances the appeal of investing in India.

Future Outlook

Despite the positive influx of FII capital, concerns linger regarding the anticipated modest earnings growth of around 5% for the fiscal year 2025. As VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, notes, “While FII inflows may remain stable, they could be limited by this modest growth expectation.”

In summary, the recent wave of investments by FIIs signifies a pivotal moment for the Indian market, driven by favorable global conditions and strong local performance. Investors and analysts alike will be watching closely to see how these dynamics evolve in the coming months.