Reduced FPI outflows from Indian equity market observed

Foreign Portfolio Investors (FPIs) in India have shown signs of reduced selling pressure recently. Their outflows totaled Rs 1,794 crore (about USD 194 million) last week. This is a decrease compared to previous weeks and comes amid easing global concerns and hopes for de-escalation in the Russia-Ukraine conflict. However, this week still marks the 15th consecutive week of outflows for FPIs. Market analysts suggest that FPIs will remain cautious going forward. They are waiting for clearer signals on the U.S. Federal Reserve's interest rate decisions, geopolitical events, and the economic outlook in India. FPIs sold equities worth Rs 1,794 crore for the week ending March 21, compared to a more substantial outflow of USD 604 million the week before. Despite the selling trend, there were instances where FPIs bought back into the market, with notable purchases of Rs 3,181 crore and Rs 710 crore on March 21 and March 19, respectively. Analysts say this change in FPIs' strategy has improved market sentiment and supported a market rally during the past week. Positive economic indicators in India, including a better-than-expected trade deficit and improvements in inflation, have helped boost sentiment. Additionally, a weakening U.S. dollar and expectations for potential interest rate cuts by the Fed have attracted some FPIs back to Indian equities. However, despite this renewed interest, FPIs have withdrawn a total of Rs 31,719 crore in March alone, following larger outflows in February and January. In total, FPIs have pulled out Rs 1.44 lakh crore from the Indian market in 2025. Meanwhile, investment in debt instruments has continued, indicating a shift in strategy towards safer assets amidst ongoing market volatility.