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Why foreign inflows are back — can they sustain? Experts on India’s FPI revivalForeign investors have poured ₹23,778 crore into Indian equities so far in May, driven by global cues, domestic resilience, and SEBI’s reforms. Experts explain the FPI resurgence and outlook.By Sheersh Kapoor   May 17, 2025, 4:00:32 PM IST (Updated)3 Min ReadForeign inflows have made a strong comeback to Indian markets in the first half of May with FIIs infusing ₹23,778 crore into equities as of May 16.

The renewed enthusiasm is driven by a combination of strong domestic fundamentals, improving global trade sentiment, and regulatory reforms by the Securities and Exchange Board of India (SEBI) aimed at reviving the bond market.

“FIIs who were sellers in the first three months of 2025, having sold equities worth ₹1.16 lakh crore, turned buyers in April with net purchases of ₹4,243 crore,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. “

Vijayakumar attributed this shift to a pause in the US-China trade war and the easing of military tensions between India and Pakistan — both of which had weighed on sentiment earlier in the year. “With inflation in India very much under control and the MPC expected to cut rates two or three more times, the macro construct in India looks good,” he added. “Going forward, FIIs are likely to continue their buying in India. Therefore, large caps will be resilient.”

The momentum has also been bolstered by a recent SEBI consultation paper proposing key relaxations for FPIs investing in Indian government bonds through the Voluntary Retention Route (VRR) and Fully Accessible Route (FAR).

“In order to provide the momentum to the drying bond market, SEBI this week proposed waivers including alignment of KYC timelines with RBI norms, elimination of trading and demat account requirements, and greater flexibility for FPIs with NRI, OCI, or resident Indian participation,” said Manoj Purohit, Partner & Leader, FS Tax at BDO India.

“These changes aim to reduce administrative burdens, simplify onboarding, and bring India’s regulatory architecture in line with global best practices,” he added, calling it a strong signal to reassure and attract foreign investors.

Also Read: SEBI extends deadline for FPI ODI issuance framework to November 17

'Expect dramatic foreign flows into India over 3-4 years'

Harish Krishnan, Co-CIO at Aditya Birla Sun Life AMC, expects this to be the start of a multi-year upswing in foreign flows. “We’re going to see some dramatic flows over the next three-four years,” he said, citing a shift in global asset allocation and India’s improving fundamentals.

Also Read: A $45 bn fund CIO sees ‘dramatic’ foreign flows into India over 3-4 years, bets on private banks

He added that both direct equity and private equity flows are likely to rise, alongside earnings reinvestment by multinational firms. Among sectors, Krishnan sees private banks as the strongest bet, noting their clean balance sheets, digital transformation, and reduced competition. He also sees rerating potential in undervalued private lenders trading below book.Continue ReadingFirst Published: May 17, 2025 3:40 PM ISTCheck out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!TagsFIIsForeign Inflowsforeign portfolio investment (FPI)Indian share marketSEBI