Foreign institutional investors (FIIs) have sustained their position as net investors in India in 2024, driven by the country’s robust economy and resilient markets. Despite global stock market volatility and geopolitical uncertainties, FIIs have maintained a strategic balance between equity selling through exchanges and investments in the primary market, signalling confidence in India’s growth story.
FII investment patterns in 2024
Equity market trends
Data from the National Securities Depository Limited (NSDL) reveals contrasting trends in FII investments. While FIIs sold equities worth ₹119,277 crore through exchanges, they invested ₹120,932 crore in the primary market by December 27. This dual approach reflects a calculated response to market valuations.
According to Dr V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, high valuations drove selling through exchanges, while fair valuations encouraged primary market investments. December 2024 saw a decline in the selling spree observed in October and November, with occasional FII buying.
Debt market investments
In addition to equity investments, FIIs have poured ₹112,409 crore into India’s debt market this year. This indicates a diversified strategy aimed at leveraging India’s stable economic outlook.
Factors driving FII participation
Macroeconomic stability
Market experts attribute the steady FII participation to India’s controlled inflation, stable interest rates, and resilient macroeconomic policies. Manoj Purohit, Partner, and Leader at BDO India, highlighted that favourable global developments, such as recent policy announcements in the US and easing geopolitical tensions in the Middle East, have further bolstered investor sentiment.
Record-breaking FDI investments
Complementing FII activity, India crossed the $1 trillion mark in foreign direct investments (FDI) in 2024, reinforcing the nation’s position as a preferred investment destination.
Looking ahead to 2025
FIIs may adopt a cautious approach in early 2025, influenced by the appreciating US dollar (index above 108) and attractive US 10-year bond yields at around 4.4%. However, market watchers predict that FIIs will resume buying equities in India when signs of growth and earnings recovery emerge.
The investment behaviour of FIIs in 2024 underscores their confidence in India’s economic resilience. Their continued activity in both equity and debt markets, despite global headwinds, highlights the attractiveness of India’s financial ecosystem.
