Foreign investors stage comeback, pour Rs 23,000 cr into Indian equities in five sessions

FIIs net bought Indian equities worth Rs 5,371.57 crore on March 25.

Foreign institutional investors have made a roaring comeback in to the Indian equities, lapping up domestic shares worth a whopping Rs 23,000 crore in the last five sessions as of March 25. After turning net buyers of Indian stocks for the first time in a month on March 18, FIIs have been on a buying spree in the last four out of five days.

This resurgence in FII activity has coincided with a seven-day winning streak for Indian benchmarks, the Nifty 50 and Sensex, helping both indices exit correction territory. The turnaround has been fuelled by easing valuations after the recent market rout, a stronger rupee, cooling inflation, and improving macroeconomic conditions in India.

During the trading session of March 25, FIIs net bought shares worth Rs 19,066.28 crore and sold shares worth Rs 13,694.71 crore. The return to buying by FIIs that began on March 18, also saw a wave of massive short covering. Data on the exchanges showed that 101 stocks out of the 220 in the futures and options segment saw short covering from FIIs in that session.

Despite this recent surge in inflows, FIIs remain net sellers of Rs 1.49 lakh crore in Indian equities for the year so far. However, the outlook appears to be shifting. Analysts at Bay Capital, an India-focused investment firm, believe that while FIIs have been selling in recent months, more attractive valuations could drive fresh inflows in the coming months.

Some hedge funds have exited due to short-term strategies, while others have reallocated investments to China and other emerging markets, contributing to the selling pressure in Indian equities. However, as valuations stabilise, sentiments are turning more constructive.

"Over the past year, many FIIs were concerned about high valuations in India. Now, those conversations are becoming more optimistic as valuations appear more reasonable," said Keyur Majmudar, Managing Partner at Bay Capital Investment Advisors.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, further highlighted that the FII return has boosted confidence among retail investors, sparking renewed buying interest, particularly in small and midcap stocks. With improving fundamentals and renewed global interest, Indian markets may see stronger participation from FIIs in the coming months.

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