Foreign Investors Pour ₹33,700 Crore into Indian Stocks This Month! What’s Fueling This Surge?

Foreign investors (FPIs) have put around ₹33,700 crore into Indian stocks this month, largely because of an interest rate cut in the US and the Indian market’s strength. This is the second-highest inflow of money into Indian stocks this year, with the highest being in March when FPIs invested ₹35,100 crore, according to data from depositories.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, believes that FPIs will likely continue buying in the coming days.

As per the data, FPIs have invested ₹33,691 crore into Indian stocks as of September 20. With this, their total investment in equities has reached ₹76,572 crore so far this year. FPIs have been buying since June, after pulling out ₹34,252 crore in April-May.

This month, FPIs remained positive on Indian stocks, partly due to expectations of a rate cut by the US Federal Reserve. The Fed’s actual rate cut on September 18 further increased their buying.

“The aggressive buying was triggered by the US Fed’s 50 basis points rate cut on September 18. This marked the start of a rate-cutting cycle, with the Fed rate expected to drop to 3.4% by the end of 2025. Declining bond yields in the US are pushing FPIs to invest in emerging markets like India,” said Vijayakumar. A weaker US dollar and the Fed’s relaxed stance are making Indian stocks more attractive globally. Robin Arya, founder of GoalFi, mentioned that the strengthening Indian rupee shows confidence in the country’s stability but might pose a challenge for exports.

Manoj Purohit, a partner at BDO India, added that balanced fiscal deficits, the effects of rate cuts, strong stock valuations, and the RBI’s inflation control efforts are making India a key focus for FPIs. He also noted that recent IPOs have attracted foreign funds, boosting the Indian stock market.

The flow of FPI investments has helped the Indian rupee gain 0.4% by the week ending September 20, which could drive even more investment. However, some experts are concerned that the market could be overheating, with stock valuations becoming too high.

In addition to equities, FPIs have invested ₹7,361 crore in debt through the Voluntary Retention Route (VRR) and ₹19,601 crore through the Fully Accessible Route (FAR). While the VRR encourages long-term investments, the FAR improves liquidity for foreign investors.

These investments in both stocks and debt suggest FPIs are increasing their involvement, but global uncertainty and recession risks remain. Experts are watching the Reserve Bank of India (RBI) closely to see if it will follow the US Fed and cut interest rates in October or delay the move until December.