MUMBAI — Foreign investors have injected nearly Rs 31,000 crore into Indian
equity markets in the last six trading sessions of March, according to the
latest depository data.
This surge in investment is mainly due to attractive stock
valuations, the strengthening of the rupee, and improving macroeconomic
indicators.
The return of foreign portfolio investors (FPIs) as buyers
has helped the stock market recover significantly.
The benchmark Nifty index has risen by about 6 per cent
during this period, reflecting renewed confidence among investors.
The change in FPI strategy, from selling to buying, is
influenced by several factors. These include a 16 per cent correction in stock
prices since the September 2024 peak, the recent appreciation of the rupee, and
strong economic indicators like GDP growth, industrial production, and
inflation.
This fresh inflow of funds has also reduced the overall
outflow for March to Rs 3,973 crore, according to depository data.
Experts believe that future FPI investments will depend on
the outcome of the reciprocal tariffs expected to be announced by US President
Donald Trump on April 2.
If the tariffs are not too harsh, the market rally could
continue, experts noted.
"Turning the tide this week, FPI inflows have started
in green, bringing back the cheer in the Indian market despite the last week of
the financial year, which usually witnesses substantial profit booking,"
Manoj Purohit of BDO India said.
He added that some of the primary reasons on the macroeconomic
front had been the United States' making announcements for the imposition of
reciprocal tariffs, ongoing military tension in the Middle East, rising
inflation, low consumption, and higher valuations.
Additionally, a key decision by the Securities and Exchange
Board of India (SEBI) has encouraged FPIs to invest.
The SEBI decided to increase the threshold for granular
beneficial ownership disclosures from Rs 25,000 crore to Rs 50,000 crore.
"FPIs having more than 50 per cent of their portfolio
in a single corporate group will continue to abide by the earlier limit.
Hopefully, this will bring back the much-needed volume in trades and liquidity
in the market," Purohit said.
This decision was made after discussions with major banks
regarding restrictions on participatory notes (P-Notes) trading volume.
