FIIs turn net buyers of equities in March, first time since December

fii inflow

Foreign institutional investors (FIIs) turned net buyers of Indian equities in March for the first time in two months, reversing a period of sustained outflows. This shift is driven by expectations of a potential rate cut by the Reserve Bank of India next month, attractive market valuations, and a more dovish outlook from the US Federal Reserve's latest dot plot projections for 2025.

As of March 27, foreign institutional investors (FIIs) recorded net equity purchases of approximately Rs8,083 crore, according to NSDL data. This marks the first significant inflow since December last year, when FIIs had invested around Rs11,000 crore. Notably, during the first half of March, FIIs were net sellers to the tune of over Rs22,000 crore, highlighting a sharp reversal in sentiment.

The renewed interest is primarily driven by expectations of rate cuts by both the Reserve Bank of India (RBI) and the US Federal Reserve, which has signalled the possibility of two additional cuts this year. Passive inflows following the Nifty index rebalancing have further supported this turnaround.

Additionally, recent liquidity measures by the RBI, attractive valuations following a market correction, and relative underperformance in US and Chinese equities have collectively positioned India as an appealing destination for global investors.

Prashanth Tapse, Senior VP of Research at Mehta Equities said recent positive shift in FII sentiment can be attributed to multiple factors with a mix of global as well as domestic reasons. “I would say attractive stock valuations post correction in the recent three months led to more appealing valuations, prompting FIIs to re-enter the market in search of potential value buys,” he said.

FIIs are of the view that India can very well manage the global risk with strong domestic consumption growth and RBI is also acting very proactively to give the required liquidity and push by reducing interest rates, Tapse added.

Since the end of September, FIIs have been aggressively selling Indian equities amid elevated valuations, subdued earnings, and signs of slowing economic growth. Between October 2024 and February 2025, FIIs offloaded shares worth around Rs 2.19 lakh crore, NSDL data showed.

Going forward, FII fund flows will hinge on global risk appetite and how Indian market valuations evolve, independent analyst Deepak Jasani said. He added that post-April 2, markets may witness a short-term bounce globally as uncertainty around reciprocal tariffs subsides. However, Jasani cautions that this rebound is unlikely to sustain over the long term.

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