A strengthening rupee and improving earnings outlook are expected to support renewed foreign portfolio investor interest in Indian markets in the coming weeks, according to market analysts.
The recent recovery in the domestic currency has changed the investment pattern of FPIs. During the week ending June 19, foreign investors bought equities on 3 trading days and sold on only 2 days. Overall, FPIs were net buyers in the cash market, investing Rs 3,386 crore.
Analysts said the prolonged phase of FPI selling appears to be ending. Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, said the key reason behind the shift is the stability and gradual appreciation of the rupee.
The Indian currency has recovered from its low of 96.96 against the US dollar, recorded on May 20, to close at 94.34 on June 19. Analysts expect the rupee to strengthen further, reducing the chances of significant foreign selling.
India’s better-than-expected FY26 earnings growth forecast of 15.6% for the Nifty 500 is also providing support to market sentiment. However, analysts cautioned that weak monsoon progress this year remains a concern.
Substantial dollar inflows are expected through FCNR(B) deposits in FY27. Combined with the decline in Brent crude prices to around $80 per barrel, these inflows are likely to help India finance its Current Account Deficit without major stress.
Analysts also noted that concentration risks in South Korea and Taiwan are making some foreign investors cautious. However, the continued artificial intelligence-driven rally and strong profit expectations for companies such as Samsung, SK Hynix and TSMC are keeping those markets attractive.
As a result, FPIs may continue to buy technology stocks in those markets during corrections while selectively booking profits in Indian equities during rallies.
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