While June has so far witnessed net FPI selling, the RBI's policies and positive market fundamentals continue to attract investor interest in the Indian market.
New Delhi: Foreign investor confidence in the Indian stock market last week provided a much-needed relief to domestic investors. While June began with a bearish sentiment, Foreign Portfolio Investors (FPIs) made significant investments last week, strengthening the market. According to recent data from the National Securities Depository Limited (NSDL), FPIs made net purchases of ₹3346.94 crore between June 9th and 13th.
This investment inflow is largely attributed to the Reserve Bank of India's (RBI) recent monetary policy changes. The RBI's interest rate cut boosted investor sentiment, directly impacting FPI activity in the market.
Interest Rate Cut Boosts Investor Confidence
The RBI's recent interest rate cut injected fresh energy into the market. Lower interest rates directly impact companies' funding costs, potentially increasing profitability and bolstering investor confidence.
FPIs engaged in heavy buying at the beginning of the week, from June 9th to 11th. This benefited the Indian stock market, leading to a surge in major indices. Foreign investors poured thousands of crores into the Indian equity market during these three days, positively impacting market momentum.
Uncertainty Returns on Friday; Geopolitical Tensions Impact Market
However, market sentiment turned volatile towards the end of the week. On Friday, June 13th, escalating geopolitical tensions between Israel and Iran created uncertainty among global investors. FPIs withdrew ₹3275.76 crore from the Indian market on this day, limiting the week's net purchases.
This event clearly demonstrates that despite India's b internal economic position, global crises immediately impact foreign investor decisions, leading to sudden sell-offs which can be a concern for smaller investors.
Overall June Trend Still Shows Selling
While last week's net buying was positive, the overall FPI trend for June remains bearish. FPIs have withdrawn funds from the market several times since the beginning of June.
In March, FPIs sold ₹3973 crore, while the figures for January and February 2025 reached ₹78027 crore and ₹34574 crore respectively. This highlights the fluctuating confidence of foreign investors.
Experts believe this week's buying shouldn't be considered the start of a long-term investment trend but rather a short-term confidence boost driven by specific circumstances.
Investment Trends to Remain Influenced by Global Factors
Market experts believe that FPI investment trends will heavily depend on global economic and political developments. Issues like the US-China trade dispute, West Asian tensions, and the upcoming US presidential elections could influence FPI strategies in the coming weeks.
Furthermore, potential US interest rate changes and dollar strengthening will also shape FPI positioning in the Indian market. Market analysts suggest that if global tensions ease and the RBI's policies yield positive results, FPI investments may regain momentum.
Implications for Domestic Investors
FPI activity has always served as an indicator for domestic investors. When foreign investors express confidence in a market, it signifies approval of the country's economic policies and business environment. Last week's buying, though limited, indicates that foreign investors are seriously considering the potential of the Indian economy.
Therefore, domestic investors should analyze market trends and global signals before formulating their investment strategies, rather than reacting impulsively.
