FPI inflows: In a positive sign for the Indian equity market, finally made a comeback on Dalal Street in October. FPIs net purchased $1.65 billion worth of after remaining net sellers for three months.
Valuation comfort following moderation in the Indian equity markets and improvement in earnings, along with the domestic growth story, fueled FPI buying this month.
G Chokalingham, founder, Equinomics Research, said the recent has been a key driver that is driving the India growth story.
The impact is already visible in the auto sales figures, with Tata Motors Passenger Vehicles (TMPV) reporting sales of 74,705 units, M&M 66,800 units and Hyundai 65,045 units in October, much higher than September sales when Tata Motors reported selling 41,151 units, M&M 37,659 units and Hyundai 35,812 units.
Additionally, despite the tariff action on India by the US, the for the fiscal year 2025-26, up from an earlier projection of 6.4%.
The impact of a strong economy, believe analysts, will be visible in the Indian corporate earnings in the second half of the financial year, which has lured FPIs to India.
“Corporate earnings are expected to improve, driven by the recent GST rate cuts and the boost in overall sales. We should start seeing this positive impact in corporate earnings for the October–December quarter. This improvement will also be supported by the decline in oil prices, which have fallen nearly 21–22% from their 52-week high,” said Chokkalingham.
Trade deal remains key trigger
A big overhang for the markets — 50% tariff imposed by the US on India — could also ease with both sides gearing up for a trade deal. “Market participants are anticipating that tariff-related tensions may ease, supported by positive signals of an upcoming , as well as between the US and India, which is another big trigger,” opined Ajit Mishra, SVP-Research, Religare Broking.
But given US President Donald Trump’s mercurial nature, the final outcome remains uncertain. And analysts are quick to point out that if the deal doesn’t go well, it could hurt India’s exports and lead to some foreign money moving out again.
Sustained FPI interest will depend on how trade discussions progress, along with stable inflation and supportive global interest rates, said Swatantra Bhatia, Partner, Forvis Mazars in India.
Can a US-China redirect FPI flows from India?
India and China remain two key players in the emerging markets, both competing for foreign investment. While investors might worry that a possible trade deal between China and the US could hurt flows into India, analysts have downplayed this theory.
Mishra explained that India is still an where FPI positioning is relatively small compared to other markets, especially China. “So, I don’t think that if China is performing well, it would significantly impact FPI flows to India. The key factors for investors remain valuations and earnings. If those concerns ease—meaning if earnings growth is strong enough—then India remains attractive,” he opined.
Additionally, on a different note, G Chokkalingham believes that tariffs between the US and China have to be there, and they will likely be at par or higher than other economies because they are close competitors — politically and economically.
Echoing a similar tone, Vikas Gupta, CEO & Chief Investment Strategist, OmniScience Capital, noted that the US-China trade deal will happen and give positive sentiment to the Chinese markets, but it is also clear that the US-China deal is a temporary truce and the two countries will continue to wage a strategic economic warfare over the next decade or so.
“US is trying to find alternative manufacturing partners (China+1) and specifically for critical technologies and resources related to rare earth and strategic minerals, while China would like to be able to manufacture the full AI and semiconductor ecosystem by itself, including chip design to equipment manufacturing to AI models. So while it could lead to a temporary blip towards China, the strategic investors from US or other foreign investors into China would possibly use the opportunity to exit China,” Gupta opined.
Will FPI buying momentum sustain?
The FPI buying momentum has renewed bullish sentiment on the Street, but it is worth noting that they remain sellers, having offloaded a whopping $15.97 billion ( ₹139,910 crore). To assume October buying would extend into November would be premature.
Bhatia said that October’s inflows are a good sign but still look like a cautious return rather than a strong trend. “For the buying to continue, factors like steady earnings growth, macro stability, and a positive global environment will be important. FPIs are likely to stay watchful of global risks, interest rate trends, and India’s policy direction before making bigger bets,” he noted.
Gupta also expects buying to be dependent on India-specific factors, such as possible RBI rate cuts during the year, GoI policies on PLI and other incentives for attracting FDI and domestic private sector investments, budget benefits for consumers, and capex plans of GoI on infrastructure.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.