Foreign portfolio investors (FPIs) are anticipated to decrease their selling activities in India due to a stable currency and improving economic outlook, leading to a significant slowdown in selling, analysts noted. There has been a decline in FPI selling in India, with FPIs selling only Rs 1,082 crore in the equity cash market on Friday. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, attributed this trend to recent geopolitical developments that are expected to result in a peace deal between the US and Iran, causing a sharp drop in Brent crude prices to below $87, which is beneficial for India as a major oil importer.
Recent measures by the Reserve Bank of India (RBI) and the Government of India to attract capital inflows have helped reduce India’s Balance of Payments (BoP) deficit to about $60 billion in FY27. These initiatives have also led to the appreciation of the rupee from Rs 96.96 to Rs 95.20 against the dollar on June 12. Analysts believe that if crude prices continue to decline, there is a high likelihood of the rupee strengthening further, which could significantly improve India’s macroeconomic situation, boost GDP growth prospects, and prevent inflation from reaching the projected 5.1 per cent in FY27.
Despite a volatile week, Indian equity markets closed positively, ending a two-week losing streak, supported by improving global sentiment and RBI measures to attract foreign currency inflows. However, investors remain cautious due to ongoing foreign institutional investor (FII) selling, concerns about inflation, and uncertainty regarding global interest rates. Analysts suggest that the stability of the Indian currency and the improving economic scenario could instill confidence in FPIs, potentially leading to a shift in their investment approach in India. Nonetheless, the resolution of the ongoing AI trade issue is crucial for FPIs to transition to buying in India, a development that may take some time, according to market experts.
