SOURCE : NEW18 NEWS
Last Updated:April 27, 2025, 10:11 IST
Foreign Institutional Investors return to India, buying Rs 32,465 crores despite geopolitical tensions. Falling dollar and resilient economy cited as key factors.
Foreign Institutional Investors return to India, buying Rs 32,465 crores despite geopolitical tensions.
FIIs In India: Foreign Institutional Investor (FII) are returning to India after a long-exodus that began in the later part of 2024. Recent trends in FII strategies in India have shown a notable shift, despite prevailing geopolitical tensions. Over the past eight days, FIIs have been consistent buyers in the Indian market, with cumulative purchases amounting to Rs 32,465 crores. This shift coincides with heightened India-Pakistan tensions following the Pahalgam terror attacks.
Factors Influencing FII Flows
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Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, attributes this reversal in FII strategy to two main factors. First, the sustained rise in the dollar, which had previously driven momentum trade towards US equities, has reversed. The dollar index fell from a peak of 111 in mid-January to around 99 currently, he said.
Second, he added, the anticipated decline in US economic growth is expected to impact corporate earnings in the US, whereas the Indian economy remains resilient with growth above 6% and recovering corporate earnings.
Optimism In The New Financial Year
Manoj Purohit, Partner & Leader of Financial Services Tax at BDO India, shares insights on Foreign Portfolio Investor (FPI) inflows at the beginning of the new financial year. Despite net inflows being in the red this week, optimism remains high for both India and FPIs due to the reviving market.
India’s Economic Outlook
India’s strong economic outlook, policy reforms, and resilient market make it an attractive destination for global capital. Recent reciprocal tariffs imposed by the US on Indian goods are modest compared to other Asian countries, giving India a competitive edge. This situation presents viable export opportunities for the country, Purohit said.
Purohit stated that India continues to be one of the fastest-growing economies, with a vast consumer market, skilled workforce, and a government committed to implementing business-friendly reforms. The government’s focus on infrastructure, digital growth, and ease of doing business further enhances investor confidence.
“The Reserve Bank of India’s decision to keep corporate bond and G-sec limits unchanged for FPIs demonstrates the government’s intent to keep the gateway open for offshore participants to continue infusing funds into the Indian market,” he added.
Investment Opportunities And Challenges
Trade diversification and strategic partnerships are creating new investment avenues , Purohit said. While tariffs may pose short-term challenges, India’s strong economic fundamentals ensure that foreign investors will continue to view India as a prime destination for long-term investments, even in risk-averse situations.
“The Indian economy appears well-insulated to withstand temporary headwinds due to macro changes and domestic challenges such as high valuations, tight earnings, and rising inflation costs,” he added.
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