Foreign Institutional Investors Become Net Buyers in March as Rate Cut Anticipation Grows
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Synopsis
Foreign Institutional Investors (FIIs) have shifted to net buyers of Indian equities in March, ending two months of selling. This change is driven by expectations of interest rate cuts by the Reserve Bank of India and attractive stock valuations, as well as recent moves by the US Federal Reserve.
Key Takeaways
- FIIs turned net buyers after two months of selling.
- Anticipation of interest rate cuts by RBI and US Fed.
- Significant equity purchases on March 27.
- Market correction has led to attractive valuations.
- Liquidity measures by RBI support investor confidence.
Mumbai, March 28 (NationPress) Foreign Institutional Investors (FIIs) have shifted to being net buyers of Indian equities in March, marking the first occurrence after two months of ongoing selling, according to the latest data from the National Securities Depository Limited (NSDL).
This change comes as expectations rise for an interest rate reduction by the Reserve Bank of India (RBI) next month, alongside appealing stock valuations and the recent position of the US Federal Reserve regarding rate cuts planned for 2025.
By March 26, FIIs had been net sellers, divesting shares valued at approximately Rs 67 crore, as per NSDL reports.
On March 27, FIIs acquired equities worth Rs 11,111 crore, while Domestic Institutional Investors (DIIs) also engaged in purchases amounting to Rs 2,517 crore.
This signifies the first substantial net inflow since December 2024, when FIIs made a similar investment in Indian stocks.
The peak of FII buying activity this year occurred on March 21, with net acquisitions reaching Rs 7,470.36 crore.
Earlier in March, FIIs had divested shares worth over Rs 22,000 crore, continuing a selling trend initiated in October 2024.
Over the last five months, foreign investors have withdrawn about Rs 2.19 lakh crore from Indian equities.
However, the trend appears to be reversing now, as the anticipation of interest rate cuts from both the RBI and the US Federal Reserve has revitalized investor confidence.
The US central bank has signaled the possibility of two rate cuts this year, which could enhance global liquidity.
Additionally, passive fund inflows resulting from the Nifty index reshuffling have bolstered this buying trend.
Other reasons that have made India appealing to global investors include recent liquidity measures implemented by the RBI, lower stock valuations following a market correction, and the underperformance of US and Chinese equities.
Market analysts predict that the trajectory of FII fund flows will be influenced by global risk appetite and valuations within the Indian market.
They foresee a short-term market rally following April 2 as concerns regarding reciprocal tariffs diminish.
