Foreign Institutional Investors (FIIs), after three months of being net sellers, have turned out to be net buyers in March 2025. After December 2024, in this month of March, finally, FIIs turn net buyers of equities as per 27 March Data published by the stock exchanges. While January and February saw continuous selling by FIIs, in this month, FIIs are coming back with expectations of an RBI rate cut in the coming month, equity valuations getting fairer, and the current view of the US Fed on rate cuts.
Nifty Rejig – A Game Changer
Nifty Rejig has been the biggest game changer, as until 26 March, FIIs were having a net seller tag with ₹67 crore of outflow on that very day, while on 27 March, NSE pointed out at the provisional data which shows the net buying to go up above ₹11000 crore.
Even two weeks back, FIIs were net sellers with net selling of around ₹22000 crore. However, with the huge net inflows in the past few days, barring a few, it has turned the tables around.
While factors like rate cut expectations and views by the RBI and Fed have an immense effect on these numbers, Nifty index rebalancing, which happened recently, has a pivotal role to play in the recent FII inflows.
Other factors playing a crucial role include –
- Liquidity measures by the RBI, such as introducing currency swaps for infusing liquidity in the banking sector. Now the liquidity push has also helped the economy to grow as the consumption growth is sustained. Furthermore, a reduction in the interest rates, boost the economy, and credit availability will be higher.
- The Indian equities valuation has become way better than it was a few months back. It has now become reasonable, while earlier it was mostly overpriced. This is why the FIIs are now considering the opportunities in the market as they see potential value in the equities.
- Uncertainty in Chinese equities has also played its role indirectly in placing India as one of the most sought-after destinations for global investors.
Market outlook
While between October 2024 and February 2025, FIIs sold off equities of around ₹2.19 lakh crore due to poor valuations, geopolitical issues, poor corporate earnings, basically due to slowdown in the economy are now again coming back as they see potential buys in the equity market again with the dropped valuations and other factors coming together.
Having said that, the equity market can remain volatile due to global market fluctuations, and even if there are short-term reversals, the long-term growth seems a bit of a distant thing now.
Source: MoneyControl
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