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Foreign portfolio investors (FPIs) have returned to Indian equity markets, investing Rs 38,971 crore this week, according to NSDL data.
The return of foreign investors comes amid a sharp sell-off in global technology stocks, triggered by concerns over artificial intelligence-related investments and a possible slowdown in data centre spending. Foreign investors had earlier been selling Indian equities as global investments shifted towards AI-related markets. However, the recent correction in global AI stocks has made Indian equities more attractive to overseas investors, prompting a reversal in investment flows. Global stock markets witnessed heavy selling on Thursday, with the downward trend continuing on Friday. A sharp sell-off in US technology stocks wiped out Wall Street's post-election rally, as concerns over a possible slowdown in AI-related data centre investments triggered losses across global markets. Selling pressure intensified after all three major US indices recorded their worst single-day losses since April 2025 on Thursday. The decline erased the gains made during Wednesday's post-election rally, when the Dow jumped more than 1,500 points, marking its best trading day since April 2025. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said last week witnessed a sudden reversal in institutional investment trends, with FPIs turning aggressive buyers while domestic institutional investors (DIIs) remained sellers on all trading days. "Last week the market witnessed a sudden and complete role reversal from institutions - FPIs turned aggressive buyers, and DIIs turned sellers on all days. The aggressive buying by the FPIs and the consequent short squeeze triggered a big rally in the market, pushing up the Nifty by 7.58% in a week," he said. Vijayakumar said the sudden change in FPI investment strategy was triggered by the AI sell-off in the US and other AI-focused markets, including South Korea, Taiwan and Japan. He said the sell-off was driven by concerns over data centre spending in the US. The Democrats, who won both chambers of Congress, are opposed to indiscriminate spending on data centres and are expected to demand safeguards for AI. "The AI sell-off has made India, which is widely regarded as a non-AI trade, attractive for FPIs. Furthermore, the impressive earnings growth in India and the attractive large-cap valuations made India a favoured investment destination," Vijayakumar said. He added that the shift in foreign investment flows had supported a sharp rally in Indian equities, with the Nifty gaining 7.58% over the last week. "FIIs have turned major buyers in index heavy weights in financials, IT, automobiles and telecom," he said. The return of foreign investors comes at a time when global markets are reassessing the pace and financial sustainability of AI infrastructure investments. According to Vijayakumar, India's positioning as a non-AI trade, along with strong earnings growth and attractive large-cap valuations, has strengthened its appeal among foreign investors. (ANI)
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