It appears that foreign portfolio investors (FPIs) have changed their bearish stance towards the Indian stock market, buying domestic equities aggressively last week and pouring in a massive ₹45,970 crore in just five trading sessions. This marks a strong turnaround after foreign investors remained net sellers for two consecutive months.
The shift in sentiment boosted the Nifty 50 by 8.6% during the week, marking its strongest weekly performance since February 2021. The rally also helped the index pare its year-to-date losses to 4.21%. At its lowest point this year, the index had fallen nearly 15% but has since recovered close to 13% from its yearly low.
In addition to equities, the inflows have also strengthened the Indian rupee, which had suffered multiple record lows this year. The currency climbed 0.6% to 93.91 against the US dollar, its strongest level since April.
The shift in sentiment towards Asia's third-largest economy comes amid a correction in global AI-linked stocks. Concerns over a potential move by the US Congress, led by Democrats, to impose restrictions on the massive expansion of data centres in the US triggered a sell-off in previously favoured chip and memory stocks across Asia.
In addition, the sharp retreat in crude oil prices has eased inflation concerns, particularly as India remains heavily dependent on oil imports. An improving earnings outlook has further enhanced the appeal of Indian equities among foreign investors.