FIIs buy Indian shares worth $2 billion in five sessions as tariffs trigger reallocation

Between October 2024 and March 2025, FIIs were net sellers of more than Rs2.33 lakh crore, a trend driven by stretched market valuations, muted earnings, and subdued economic growth.

After a sustained selling since October 2024, foreign institutional investors (FIIs) have turned net buyers, pumping over $2 billion into Indian equities over the past five trading sessions.

Data from NSDL showed that FIIs invested over $1.9 billion between April 15 and 21, and provisional figures from the NSE indicate additional inflows worth Rs 1,290 crore on April 22.

This recent buying spree marks a notable shift from recent months when FIIs were mostly sellers in Indian equities. The last time FIIs ended a month as buyers was in December when they were net bought a little over $1.8 billion. In the current month till date, FIIs are net sellers at nearly $2 billion.

A similar bout of buying, however, was seen in late March when FIIs were net buyers at $3.6 billion between March 20–27 - primarily driven by short covering - only to resume selling shortly thereafter. Market participants are now closely watching whether the current momentum sustains.

Several analysts attribute the recent shift in fund flow to broader global macroeconomic trends. The ongoing trade tensions between the US and China have made investors cautious about allocating fresh capital to those regions, prompting a reallocation towards European markets, emerging economies, and safe-haven assets like precious metals.

Additionally, the US Dollar Index has declined significantly in recent weeks. Historically, a weaker dollar - often accompanied by falling interest rates - drives capital flows into emerging markets as investors seek higher yields. However, this time, the dollar has weakened even as US bond yields have risen, suggesting that investors may be pulling out of US assets due to concerns over the business impact of tariffs, a potential economic slowdown, earnings downgrades, and rising inflation, experts said.

Recent liquidity measures by the Reserve Bank of India (RBI), along with attractive equity valuations after the correction, and strong macroeconomic factors have made Indian markets increasingly attractive.

Pramod Gubbi, Co-Founder of Marcellus Investment Managers said, "The sustainability of FII inflows will largely depend on how global trade policies evolve, which have so far remained unpredictable."

Since April 9 when former US President Trump announced a temporary suspension of tariffs for all trade partners except China - India's benchmark indices have surged, with the Sensex and Nifty rising between 9-10%, while the BSE Mid and Smallcap indices have gained over 11%.

Mayank Mundhra, FRM and VP - Risk & Head of Research at Abans Financial Services, noted that the recent FII buying in India is driven by a stable policy environment, favourable tax incentives, and expectations of rate cuts, all of which are likely to boost consumption and support stronger corporate earnings in FY26.

Between October 2024 and March 2025, FIIs were net sellers of more than Rs 2.33 lakh crore, a trend driven by stretched market valuations, muted earnings, and subdued economic growth.

Devarsh Vakil, Head of Prime Research at HDFC Securities said, "We believe these inflows are sustainable and likely to continue. Investor interest is particularly strong in banking and financial services, capital market plays, defence, and consumer-facing stocks."

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