Source: Mint

In a significant change not seen in more than 20 years, Domestic Institutional Investors (DIIs) have surpassed Foreign Institutional Investors (FIIs) in ownership of stocks listed on the NSE as of March 2025. However, any thoughts of foreign interest waning can be put to rest, as FIIs mounted a rapid recovery, with 14 consecutive days of net purchasing up to May 7, 2025.

Historic Buying-Trend and Market Response

Data since 2010 shows that when FIIs buy Indian equities continuously for 14 trading sessions, the market is expected to move along a bullish trajectory. Nifty 50 index has returned consistently positive returns forward in 25 such instances, with profits increasing over longer holding periods. Analysts accept this as a strong indication that momentum is likely to develop in the market.

What Has Been Propelling the FII Comeback?

Such are several macroeconomic and global forces driving interest:

Proactive Liquidity Measures from the RBI

The Reserve Bank of India has intervened in order to sustain and support the economy, and to improve liquidity in the following ways:

  • Cuts to Repo Rates: The RBI cut rates by 25 bps in april 2025 and in an accommodative stance would be conducive to lending.
  • Open Market Operations: The RBI has made an announcement of purchases of ₹1.25 trillion in government bonds which will help on yields and borrowing costs.
  • Relaxations of LCR Norms for Companies: The changes to liquidity norms for deposits of digital link shall free up capital by as much as ₹3 trillion to deploy in lending.
  • Dividend Payouts: A dividend in the range of ₹2.3–2.5 lakh crores expected from the RBI to the government might ramp up capital expenditures and welfare spending.

Declining Crude Oil Prices

As Brent crude falls below USD 60 per barrel—a four-year low—India is set to benefit. Falling crude oil prices are expected to lower input costs across a number of sectors, particularly for oil marketing companies, airlines, and manufacturing.

Strength of Indian Rupee

The rupee has gained 4.41 % since March 2023, appreciating from 87.97 to around 83.76 against the USD. A strong rupee, along with growing foreign exchange reserves shows that economic stability is taking center stage, which in turn empowers the market’s hopeful outlook. 

A Way Forward with Better Global Trade

Although tariffs on goods increased globally for a short time, conversations between the US and the UK are helping to ease the pain somewhat. The acceptance of India as a stable trading partner is growing, which makes India more appealing as an investment.

Outlook: Bullish yet Cautious

A combination of strong domestic efforts, and a more favorable global environment makes Indian equities appear highly attractive. If these trends continue, which they historically do in similar circumstances, the Nifty 50 will continue up across time.

Experts caution that discretion should be used with the US Federal Reserve and their actions, geopolitical issues, and inflation should all be considered.
Disclaimer: The views and market forecasts covered in this article come from the analyst’s view.