Equity Inflows Surge in India as Global Funds Increase Exposure

Foreign Portfolio Investors Boost Indian Equities as February Inflows Top Domestic Buying​

Foreign inflows into Indian equities are gathering momentum, with overseas investors outpacing domestic institutions in February for the first time in 17 months. The renewed interest comes amid signs of stronger corporate earnings and relatively attractive valuations.

Foreign Inflows Cross $2.1 Billion in February​

According to a Bloomberg report, global funds added a net $2.1 billion to Indian equities through February 24. This surpassed the $1.8 billion invested by domestic institutional investors during the same period.

If the trend sustains through the end of the month, it will mark the first time since September 2024 that foreign portfolio inflows exceed domestic buying activity.

The reversal in trend highlights a shift in investor positioning as global funds reassess India’s growth prospects and market dynamics.

Trade Agreement With United States Boosts Sentiment​

The surge in foreign investment follows India’s successful completion of a long-awaited trade agreement with the United States earlier this month. The development appears to have strengthened global investor confidence in the country’s economic outlook.

During the same period, Chinese stocks listed in Hong Kong recorded their steepest decline since October when compared with Indian equities. The relative underperformance of Chinese markets may have further supported allocation shifts toward India.

December Quarter Earnings Show Improvement​

Corporate earnings for the December quarter signaled improvement, reinforcing optimism around India’s profitability trajectory.

Jefferies projected that profits tracked by MSCI India are likely to grow by approximately 10 percent for the fiscal year that ended in March. The forecast has added to the constructive view on Indian equities among global investors.

Sectoral Allocation Shifts: Capital Goods and Financials Gain​

Global funds increased their exposure to capital goods and financial services stocks during the month. These sectors attracted fresh allocations as investors positioned for growth linked to economic activity and financial expansion.

However, earlier in February, foreign investors trimmed their holdings in information technology stocks. Concerns related to artificial intelligence developments prompted a reduction in exposure to the sector.

Outlook for Indian Equity Inflows​

With earnings momentum improving and valuations moderating, foreign portfolio flows into Indian equities have strengthened in February. Should current trends persist, overseas inflows are poised to exceed domestic institutional buying for the first time in over a year, marking a notable shift in market participation patterns.