FPIs pour ₹14,429 crore into Indian stocks, the highest in 8 months; is this the start of a sustained rally?

The Indian equities market has once again emerged as the favourite destination for foreign investors as it attracted ₹14,429 crore of foreign fund inflows in May—the highest levels since September last year. Capital inflows by foreign portfolio investors (FPIs) touched their highest levels in the past eight months on the back of de-escalation in Indo-Pak tensions, possibility of a trade deal with U.S., a weakening U.S. dollar and better-than-expected quarterly corporate earnings by most companies, according to a recent report by brokerage Angel One.

“FPI inflows for May currently stand at ₹14,429 crore, their highest levels since September last year,” the report noted.

However, on a cumulative basis for calendar year 2025, India still faces outflows of ₹97,922 crore, indicating that FPIs remained uncertain on account of global uncertainty.

In May itself, India witnessed bouts of sharp sell offs from FPIs on account of Indo-Pak tensions and later, rising U.S. Treasury yields. Last week, on May 21, FPIs sold Indian equities worth ₹10,000 crore in a single day.

“In the near term, there can be some headwinds on account of global geopolitical uncertainties but the long-term outlook for India continues to remain intact with the markets continuing to factor in strong growth for the Indian economy," the report noted.

The data showed that January was the worst month in terms of net outflows, with FPIs selling equities worth around ₹78,027 crore. This selling pressure reduced to around ₹4,000 crore in March, and the buying started from April onwards. FPI flows turned net positive for the first month in April, and the trend has not only continued in May, but strengthened as well. May has seen inflows of around ₹14,429 crore till the end of the day on May 26.

“Despite the recent resurgence in FPI inflows, near-term uncertainties such as geopolitical risks, rising U.S. Treasury yields, and any slowdown in earnings in India can hurt FPI inflows,” said Vaqarjaved Khan, Senior Fundamental Analyst (CFA), Angel One.

Citing recent IMF data, Khan said that India has become the fourth largest economy surpassing Japan and is marginally behind Germany at this moment. This shows that the long-term growth story in India backed by consumption and in-house manufacturing continues to remain intact. Meanwhile, India’s corporate earnings over the next three to five years is expected to compound at a growth rate of 14-17% as well. Hence, whenever valuations become attractive, FPI inflows during such times will see a huge boost like the recent one in April and May, he added.

Sector-wise, Banking, Financial Services, and Insurance (BFSI) is the new darling of FIIs as it attracted substantial inflows of ₹31,104 crore in the past two months. This is followed by telecom, which has witnessed consistent inflows for the past five months, garnering nearly ₹16,235 crore. Among others, chemicals has seen steady buying interest from FIIs, with inflows of ₹4,606 crore in the past eight months, according to SBI Securities data.

Meanwhile, domestic institutional investors (DIIs) extended their support to the domestic bourses with net investments of ₹36,243 crore till date in May. Overall, DIIs have infused around ₹2.5 lakh crore into Indian equities in CY25 as they remained net buyers in all five months so far this year. They have been consistently pouring in funds in equity market since July 2023.

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