Foreign inflows into equity, debt markets rise to Rs 30,950 crore in May

Indian Express

2 days ago

After heavy outflows in the last eight months, inflows by FPIs into equity markets in May have hit the highest levels since September last year on the back of de-escalation in Indo-Pak tensions, possibility of a trade deal with the US, a weakening US dollar and better than expected corporate earnings quarter for most companies.
In May, FPIs bought equity for Rs 19,860 crore through the exchanges, according to NSDL data. The change in FPI strategy in India which began in April continued in May, leading to a marginal 12 bps rise in their ownership in listed companies to 17.5 per cent on a sequential basis. FPIs remained sellers in India in the first three months of 2025. The big selling in stocks began in January (Rs 78,027 crore) when the dollar index peaked at 111 in mid-January. The intensity of selling declined and FPIs turned buyers in April with a buy figure of Rs 4,223 crore. Foreign players pulled out Rs 2.16 lakh crore from Indian equity market between October 2024 and March 2025.
Total FPI inflows into equity and debt amounted to Rs 30,950 crore in May with debt inflows at Rs 12,155 crore. There was heavy FPI inflow of Rs 29,044 crore into the debt market in March this year. Despite the inflows in May, FPI outflows from equity in 2025 so far were at Rs 92,491 crore. 'Global macros like declining dollar, slowing US and Chinese economies and domestic macros like high GDP growth and declining inflation and interest rates are the factors driving FPI inflows into India,' said a leading research firm in its report.
India's better-than- expected GDP growth in Q4 of FY25 at 7.4 per cent is an indicator that growth is rebounding and this can lead to revival of corporate earnings in FY26. While FPIs are likely to continue their investment in India, at higher levels they might sell since valuations are getting stretched. In May itself, India witnessed bouts of sharp selloff from FPIs on account of Indo-Pak tensions and the latest being rising US Treasury yields. On May 21, FPIs sold Indian equities worth Rs 10,000 crore in a single day.
'In the near term, there can be some headwinds on account of global geopolitical uncertainties but long-term outlook for Indian continues to remain intact with the markets continuing to factor in strong growth for Indian economy,' says Vaqarjaved Khan, senior fundamental analyst, Angel One Ltd.
According to the NSE, FPI ownership in NSE-listed companies had been declining since March 2023 — barring a brief uptick in September 2024 — amid continued volatility in foreign flows. This reversed slightly in March 2025, with FPI share rising 12 bps quarter-on-quarter to 17.5 per cent, driven by gains in private banks where FPIs have high exposure.
Excluding financials, FPI share fell 26 bps to a 13-year low of 15 per cent.
FPIs also increased exposure to microcaps, with their share in companies outside the Nifty 500 hitting a 10-quarter high. Their holding in the Nifty 50 stayed flat at 24.3 per cent, while it fell 28 bps in the Nifty 500 to 18.5 per cent.
Despite the recent resurgence in FPI inflows, near-term uncertainties such as geopolitical risks, rising US Treasury yields, any slowdown in earnings in India can hurt FPI inflows, Khan said. India's long term growth story backed by consumption and inhouse manufacturing continues to remain intact. Meanwhile, India's corporate earnings over the next 3-5 years is expected to compound at a growth rate of 14-17 per cent. Hence, whenever valuations become attractive, FPI inflows during such periods will see a huge boost like the recent one in April and May, Khan said.
FPI flows in May till date were positive for all key emerging markets except Thailand. India, Brazil, Indonesia, Malaysia, Philippines, S.Korea, Taiwan and Vietnam witnessed inflows.