India Leads Asian Markets with $1.4 Billion Foreign Investment Inflow
Following months of aggressive selling, foreign investors have returned to Indian equities in a big way, pumping in $1.39 billion this week alone—the biggest inflow in the entire Asian region. According to data provided by Bloomberg, this is a major reversal from the huge outflows since September 2024, when foreign institutional investors (FIIs) sold over $28.18 billion worth of Indian stocks. Since March 20, the FIIs have become net purchasers, buying close to $2.37 billion worth of Indian equities, further strengthening the nation's reputation as a favorite investment destination in the region.
Conversely, a number of other Asian markets saw sustained outflows, with Taiwan seeing the biggest foreign fund withdrawal of $298 million, followed by Malaysia at $161 million and Thailand at $89 million. Vietnam and the Philippines also saw net outflows of $32 million and $64 million, respectively. Indonesia and South Korea, on the other hand, experienced net inflows of $158.3 million and $118 million, again underscoring India's isolated success in terms of attracting international investments.
The recovery of FII flows is quite much to do with the liquidity-supporting actions of the Reserve Bank of India (RBI) and increasing hopes of a reduction in interest rates in the forthcoming Monetary Policy Committee (MPC) review in April. The central bank has actively provided liquidity to the banking system through different mechanisms, such as daily, normal, and long-term Variable Rate Repo (VRR) auctions, USD/INR buy-sell swap auctions, and Open Market Operations (OMO) in government securities. These measures have strongly improved investor sentiment and stabilized the Indian financial markets.
One of the main reasons for the increased interest in Indian equities is the correction in valuations after a prior market rally. While equity prices are cooling down, India has emerged as an attractive investment option, particularly when the US and Chinese markets are unpredictable. The increased foreign investor interest has also pushed Indian stock markets up by leaps and bounds. The benchmark BSE Sensex and NSE Nifty have rallied 5.5 percent from the beginning of March, with enhanced optimism. Wider market indices have outperformed too, with the BSE Midcap index increasing by 9.8 percent and the BSE Smallcap index rising by 11.1 percent, again reflecting investors' enthusiasm.
While the upbeat sentiment is clear, market observers warn that there are still risks. Fears about global economic uncertainty, geopolitics, and sectoral weaknesses can continue to affect market mood in the near future. A few analysts caution that although India's stock market has seen robust inflows, the rally may not have fundamental growth drivers to sustain long-term momentum. Potential geopolitical and trade threats, such as looming reciprocal tariffs by US President Donald Trump, could also further dent investor confidence and shape global capital flows.
While the recent FII inflows are a reflection of renewed confidence in Indian markets, analysts opine that one must be careful in the face of changing global macroeconomic contours. The sustainability of the present upswing will have to await external determinants such as central bank moves, stability in the global economy, and continuing trade developments.
