After a long period of heavy selling, foreign institutional investors (FIIs) are buying Indian stocks again. The shift is linked to a firmer rupee and other friendly market signals, which could be good news for everyday investors.
Why FIIs Sold Earlier in 2025
FIIs have taken out more than ₹155,000 crore worth of Indian shares this year. The main reasons were:
- A weak Indian rupee that lowered dollar‑denominated returns.
- High U.S. tariffs on Indian goods, which hurt export‑related earnings.
- Elevated stock valuations and slowing corporate earnings.
What Sparked the Recent Buying
In the last week FIIs bought about ₹1,346 crore of shares, becoming net buyers for the first time this month. Analysts point to two key drivers:
- Rupee recovery: The rupee moved back above ₹90 per $1 after RBI intervention, reducing hedging costs and improving dollar returns for foreign investors.
- More reasonable valuations: The market correction has made large‑cap financial and IT stocks look cheaper, attracting FII interest.
Supporting Global and Domestic Factors
Two broader trends helped the turnaround:
- Lower U.S. bond yields: Two‑year Treasury yields fell 72 basis points this year, and the 10‑year yield is down 42 basis points, making emerging‑market equities more attractive.
- Favourable Indian macro environment: Compared with many other emerging markets, India’s growth outlook and policy stance remain strong.
Looking Ahead: Will 2026 Bring Stronger FII Flows?
Analysts are cautiously optimistic. They expect inflows to continue, but likely in a selective way—favoring high‑quality companies with clear earnings visibility rather than broad market buying. Continued rupee stability, global rate cuts, and a recovery in corporate earnings will be key.
Bottom Line for Retail Investors
While the market may still see ups and downs, the recent FII buying signals a potential lift for Indian equities, especially in sectors like finance and technology. Keep an eye on rupee movements and global rate trends—they can influence how much foreign money flows into the market.
Remember, this is perspective, not a prediction. Do your own research and consider talking to a certified financial adviser before making any investment decisions.