FPIs pump ₹19,000 crore in Indian stock market in May, highest since Sept. Will the trend sustain?

Improved domestic fundamentals, rising corporate earnings, and a weaker US dollar kept foreign investors bullish on Indian stocks for the second straight month in May, cementing India’s position as Asia’s favoured equity market.

In May, FPIs bought Indian stocks worth ₹19,686 crore through the exchanges, marking the highest monthly inflow since September, when they had pumped in nearly ₹50,000 crore. FPIs turned into net buyers in April by infusing ₹4,223 crore, according to the depositories data. 

Before this, foreign portfolio investors (FPIs) had pulled out ₹3,973 crore in March, ₹34,574 crore in February, and a substantial ₹78,027 crore in January.

Domestic institutional investors also remained net buyers in May, investing ₹47,441 crore. Strong inflows from both domestic and foreign investors pushed the Nifty 50 and Sensex to a 7-month high during the third week of May, helping both indices extend their winning streak to a third straight month and recover most of the losses incurred during October and February.

Having largely been sellers in the months following Indian benchmarks hitting record highs in September, foreign investors turned bullish on Indian stocks in April. This shift was driven by growing optimism that India’s domestically driven economy is better positioned to weather the global trade slowdown compared to its peers.

Will FPI inflows continue in the coming months?

The sustainability of FPI inflows, as per the analysts, remains uncertain amid ongoing global trade tensions. While these tensions have eased in recent weeks, they could flare up again in the near term, as the 90-day pause on tariffs is set to end in July.

Major export-driven economies are feeling the pressure and are currently in talks with the U.S. to finalise trade agreements. India-U.S. trade talks are scheduled for June 5–6, 2025. Meanwhile, India is also proactively forging Free Trade Agreements (FTAs), having recently signed a deal with the UK, and is currently in discussions with the European Union.

Nevertheless, risks to FPI inflows persist—including rising U.S. bond yields, which have surged recently amid concerns over the U.S. fiscal outlook, potential earnings downgrades, and geopolitical shocks—all of which could derail the positive momentum.

CLSA has cautioned that India’s “safe haven” status could fade if U.S.-China tensions de-escalate. Ultimately, whether FPIs continue to invest will depend on global factors such as U.S. monetary policy and India’s ability to maintain earnings growth.

While the current buying spree reflects strong investor confidence, history suggests that FPI flows can be highly sensitive to shifts in the global economic landscape, as per the experts. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.