FIIs return to Indian stock market, lap up shares worth ₹14,670 cr in 3 days. What’s behind the reversal?

In a remarkable display of trust, foreign institutional investor (FII) have pumped a significant ₹14,670 crore into the Indian cash market during the past three trading sessions (April 15-17) , according to experts. This sharp increase in FII engagement represents one of the most striking buying trends in recent times, indicating a resurgence of optimism in the Indian equity market amidst changing global and domestic economic signals. The influx of foreign capital has not only lifted market sentiment but also sparked hopes for ongoing momentum in the weeks to come.

Foreign portfolio investments (FPIs) continued to offload shares in the first half of April. The total amount sold by FIIs for the month, as of April 19th, reached ₹23,999 crores (NSDL). Nevertheless, there was a noticeable shift in FII behaviour during the last three trading days ending on April 17th.

According to Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities after a long time FII has shown a healthy comeback with significant purchases in the Indian cash market, which is due to multiple factors globally, as well as from a domestic micro economic point of view.

Declining US dollar

Tapse explained that for FII’s, a decline in US Dollar Index around 100, and with expectations of further weakening prompted foreign investors to come back from the US to India, which is offering better risk-adjusted returns when compared emerging markets with low inflation, low crude and better than expected Q4FY25 earnings especially from the banking space.

Adding to the above rationale recently, postponement of US tariffs by 90 days has improved global trade tensions and contributed to a rally in the market. While volatility may persist, with market trading near its 200 DMA resistance, which is also a major resistance level to watch, if we close above 20050, 200 DMA levels on a weekly basis the strength would continue in the market and signal potential upside.

However if the market closes below 23,300 on a weekly basis we could see more selling pressure largely driven by profit booking. A sustained close above key resistance levels could bring in further institutional flows and strengthen the bull case, believes Prashanth Tapse.

Lackluster growth for US and China

Additionally, Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, mentioned that another contributing factor to the FII purchasing activity is that both the US and China are anticipated to experience lackluster growth this year, while India is projected to achieve a growth rate of 6% in FY 26, even amid a challenging global landscape. This relative advantage of India in terms of growth may also result in superior market performance. Consequently, the trend of FII buying is likely to continue, even in these uncertain conditions.

Investment interest from both domestic and foreign investors is expected to concentrate on themes related to domestic consumption such as financial services, telecommunications, aviation, cement production, select automobile stocks, and healthcare, explained Vijayakumar.

Optimism around Q4FY25 earnings

“Investors are approaching this quarter’s muted earnings with caution, reflecting concerns over sluggish demand and sectoral headwinds. However, there is a sense of guarded optimism building, as the RBI’s recent interest rate cut—and the expectation of an additional 50-75 basis points reduction over the next 100 days—are poised to lower borrowing costs and stimulate credit offtake. This monetary easing is widely seen as a catalyst that could revive corporate growth and set the stage for a stronger earnings trajectory in the upcoming quarters, even as global uncertainties linger,” said Mohit Gulati, the CIO and managing partner of ITI Growth Opportunities Fund.

FPI activity so far

FPIs became net buyers on April 15, injecting ₹6,065 crore into the Indian stock market, which marked the end of a nine-day selling spree that led to total outflows of ₹38,992 crore. The last time FPIs were net buyers was on March 27, when they acquired equities worth ₹11,111.25 crore.

This change in outlook among foreign investors came after US President Donald Trump relaxed some of his stringent tariff policies on major trading partners. Investors have also observed the White House’s ongoing trade negotiations with most significant economies, creating optimism that a wider trade agreement could be forthcoming and alleviate global market uncertainties.

Following an infusion of ₹32,576 crore into Indian equities between March 20 and March 27, FPIs shifted to being net sellers in the early part of April. In February, FPIs withdrew ₹34,574 crore, and January experienced an even larger exodus of ₹78,027 crore, as per NSDL data. From October 2024 to February 2025, FPIs pulled out over ₹3 lakh crore from the Indian stock market, primarily due to worries over inflated valuations and disappointing corporate earnings.

The Way Ahead

“Looking forward, we expect FIIs could maintain their optimistic stance and continue their comeback to Indian markets with increasing strength. The combination of global tailwinds, stable domestic macros, and improving corporate earnings creates a conducive environment for sustained inflows. If technical levels align with fundamentals—especially with a decisive move above key resistance zones—we could witness a broader rally supported by institutional buying,” explained Prashanth Tapse.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.