Will FIIs Keep Investing in India with Strong GDP Growth?
Click to start listening
Synopsis
India's impressive GDP growth of 7.4% in Q4 FY25 signals a promising recovery, attracting foreign institutional investors (FIIs) to continue their investments. With positive macroeconomic indicators, the outlook for corporate earnings looks bright for FY26. Learn how this trend may influence the Indian market going forward.
Key Takeaways
- India's GDP growth in Q4 FY25 is at 7.4%.
- FIIs have resumed buying after a period of selling.
- Global factors and strong domestic indicators are driving inflows.
- Key sectors attracting investments include autos and financials.
- RBI's interest rate decisions will be critical for future market stability.
Mumbai, May 31 (NationPress) The recent GDP growth in India, reported at 7.4 percent for Q4 FY25, exceeds expectations and signals a recovery that could boost corporate earnings in FY26. Analysts believe that foreign institutional investors (FIIs) are poised to maintain their investments in India.
Since April, a shift in FII strategy has been evident, following a period of continuous selling in the initial months of the year.
Notably, significant selling commenced in January, totaling Rs 78,027 crore when the dollar index peaked at 111. However, the pace of selling has since moderated, with FIIs transitioning to buyers in April, acquiring Rs 4,243 crore.
As of May 30, FIIs have purchased equity worth Rs 18,082 crore through exchanges, according to NSDL data. Factors such as a declining dollar, sluggish economies in the US and China, alongside strong domestic indicators like high GDP growth and falling inflation and interest rates, are propelling FII inflows into India, stated Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd.
In the first half of May, FIIs have shown interest in sectors such as autos, components, telecom, and financials.
Ketan Vikam, Head of Sales at Almondz Institutional Equities, warns that any rise in US bond yields could exert downward pressure on equity markets, prompting a risk-off sentiment that might lead investors to reduce their holdings.
Nevertheless, FIIs have maintained a positive outlook on Indian equities, despite a lackluster trend in the preceding week. This optimism could persist into June, especially if global markets show signs of recovery.
The upcoming decision on the RBI's credit policy regarding interest rates will be closely monitored, as further cuts could bolster market stability in the medium term, analysts noted.
Point of View
It's crucial to acknowledge the resilience of the Indian economy amidst global uncertainties. The consistent interest from FIIs highlights a growing confidence in the market, suggesting that India remains a pivotal player in the global economic arena.
NationPress
20/07/2025
Frequently Asked Questions
What is the current GDP growth rate of India?
India's GDP growth rate for Q4 FY25 is reported at 7.4%. This exceeds previous expectations and indicates a positive economic trajectory.
Are foreign institutional investors still investing in India?
Yes, foreign institutional investors (FIIs) have resumed buying, with significant investments noted in recent months, particularly in sectors like autos and financials.
What factors are influencing FII investments in India?
Key factors include a declining dollar, economic slowdowns in the US and China, and strong domestic growth indicators such as high GDP and lower inflation.
How might US bond yields affect Indian equity markets?
A spike in US bond yields could create downward pressure on equity markets, potentially leading to a risk-off sentiment among investors.
What should investors watch for regarding RBI policy decisions?
Investors should keep an eye on the RBI's interest rate decisions, as further cuts could provide a supportive environment for market stability.
