Foreign Investors Surge in Indian Equity Market, But Caution Looms Ahead

Investment Trends in Indian Equity Market

New Delhi: In June, foreign investors injected ₹14,590 crore into India's equity market, marking a third consecutive month of positive investment. This influx was bolstered by improved global liquidity, reduced geopolitical tensions, and a rate reduction by the Reserve Bank of India.

However, the trend reversed in July, with foreign portfolio investors (FPIs) becoming net sellers, withdrawing ₹1,421 crore during the first week, as per depository data.

Looking ahead, FPI flows are anticipated to be volatile due to upcoming tariff deadlines and fluctuations in US economic data, according to Vaqarjaved Khan, Senior Fundamental Analyst at Angel One.

Additionally, the buying activity of FPIs will depend on the indications from Q1FY26 earnings reports. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that positive earnings could boost market sentiment, while disappointing results might negatively affect flows.

Data indicates that FPIs invested a net total of ₹14,590 crore in equities in June, following a net investment of ₹19,860 crore in May and ₹4,223 crore in April. This comes after significant outflows of ₹3,973 crore in March, ₹34,574 crore in February, and a staggering ₹78,027 crore in January.

Thus far in 2025, FPIs have experienced an outflow totaling ₹79,322 crore.

According to Himanshu Srivastava, Associate Director of Manager Research at Morningstar Investment, FPIs displayed a cautious yet improving outlook in June 2025, initially facing substantial outflows due to high US bond yields, trade tensions, overvalued Indian stocks, and a deteriorating geopolitical climate.

However, sentiment improved towards the end of the month as global liquidity conditions became more favorable, geopolitical tensions eased, the RBI lowered rates, the rupee appreciated, and oil prices stabilized.

In the latter half of June, FPIs favored sectors such as financials, automobiles, and oil and gas, while they sold off in capital goods and power sectors.

Conversely, FPIs withdrew ₹6,121 crore from the general debt limit and ₹6,366 crore from the voluntary retention route during the review period.