FIIs and FPIs inflow in India likely to stay strong in FY25, post record inflow in FY24

With markets at an all-time high, foreign institutional investors (FIIs) and foreign portfolio investments (FPIs) are pouring money in the Indian market. On the back of robust economic growth and great momentum in earnings growth FIIs, FPIs and DIIs investment is likely to stay strong in FY25. The Indian stock market witnessed a historic surge in investment during FY24, setting a new milestone in the realm of foreign investment. The Central Depository Services Limited (CDSL) data suggests, that foreign investors brought in a staggering amount of over Rs 3,39,064 crore in India's stock market in FY24, the highest-ever investment so far.

While on the other note, the country has witnessed a significant decline in Foreign Direct Investment (FDI) during the period from April 2023 to December 2023. According to the data released by the Department for Promotion of Industry and Internal Trade (DPIIT), the FDI plummeted by 9% to INR 2,65,030 crores, down from INR 2,91,073 crores recorded during the corresponding period of April 2022 to December 2022. The FDI inflows to India is continuously declining since the year 2021.

The data released by DPIIT states that the FDI investment peaked during the pandemic year in FY 2020-21 at 59.6 billion dollars. Since 2020 it has been on a continuous decline. The reduction in FDI signals apprehensions about the investment climate and regulatory environment. "FDI flows globally have been moderating from a high of $ 2 trillion in 2015 to an estimated $ 1 trillion in 2023. India has also seen FDI flows slowing down in the last two years. This has been a function of overall a funding winter hitting the VC / PE arena, plus overall global overcapacity in many sectors" says Ajay Bagga, Market expert. He further added "FDI is expected to pick up by FY 2026 as private capex increases in India as various sectors hit capacity utilisation constraints. China+1 will also help in this. More PLI (Production Linked Intensive) schemes by the government will also attract more large ticket FDI in sectors like EVs, renewables, semiconductors, export substitution and electronics".

Investors often view FDI as a key indicators of a country's economic health and prospects for growth. The decline in FDI indicates a low confidence among foreign investors in India's economy. But, it is also seen, that when stock markets are on an uptrend, FIIs and FPIs investment goes up and FDI declines, as investors feel they can make quick money from markets. FDI investments are long term and realizes profit in a longer duration. It is also seen that DIIs investment is also showing an uptrend and retail investment in mutual funds is seeing new highs every month, suggests the strength of Indian economy. And experts suggest by FY26 private capex will increase substantially in India.