Foreign portfolio investment (FPI) inflows into Indian markets reached a historic high in May 2025, marking the strongest month of the year for foreign capital, according to data released by the National Securities Depository Ltd (NSDL).

Net FPI inflows for the month stood at ₹19,860 crore, a record for 2025 and a significant rebound after several months of persistent outflows. The robust performance was particularly notable during the week of May 26 to May 30, when foreign investors pumped in a net ₹6,024.77 crore. Each trading day that week saw positive inflows, with the exception of Friday, which recorded a net outflow of ₹1,758.23 crore, reflecting some profit-taking or risk aversion at the week’s end.

Despite this impressive monthly surge, the cumulative FPI investment for the first five months of 2025 remains in negative territory, with net outflows totalling ₹92,491 crore from January to May. The year began on a cautious note, with significant foreign divestment in the early months: January saw outflows of ₹78,027 crore, followed by ₹34,574 crore in February and ₹3,973 crore in March. The reversal in May is widely interpreted as a sign of a potential turnaround in foreign investor sentiment, driven by the weakening US dollar, improving global risk appetite, and positive domestic economic indicators.

Market analysts attribute the renewed interest in Indian equities to several factors. The decline in the value of the US dollar has made emerging markets like India more attractive, while declining US inflation and expectations of interest rate cuts by the Federal Reserve have further boosted investor confidence.

Domestically, India’s strong macroeconomic fundamentals—including robust GDP growth, solid corporate earnings, and ongoing policy reforms—continue to act as key magnets for global capital. The recent inflows have also coincided with positive sectoral performances, with the defence, capital markets, and realty sectors outperforming broader indices.

However, FPI flows remain sensitive to global developments and external headwinds. The final trading day of May saw Indian equity benchmarks close marginally lower, with the Sensex down 182 points (0.22%) at 81,451.01 and the Nifty 50 settling at 24,750.70, down 83 points (0.33%), reflecting mixed global cues and some caution among investors. Market participants are now closely watching economic data releases and global monetary policy shifts to determine whether the momentum seen in May can be sustained through the rest of the year.

The year-to-date FPI flows remain negative, the record inflows in May 2025 signal a possible shift in foreign investor sentiment and a renewed confidence in India’s economic prospects. The outlook for continued inflows will largely depend on the stability of global markets and the persistence of domestic economic strength.

Agencies