Are FIIs back on D-Street? Foreigners increase holdings of Indian stocks; buying highest in 2 months as rupee stabilises
The story of Indian stock markets has been defined by the exodus of foreign investors in 2025. But in the last few sessions, foreign investors seem to be back on Dalal Street, with purchases of Indian equities seeing a surge last week, marking the strongest inflows in nearly two months, as the rupee staged a sharp recovery from record lows.Overseas investors bought $644 million worth of domestic shares, the highest level since mid-October, according to data compiled by Bloomberg. The renewed buying interest came as the rupee recorded its largest weekly gain in almost six months, reversing part of the pressure seen earlier.The inflows followed a period of sustained selling, during which foreign investors had pulled out nearly $1.8 billion from Indian equities over the previous three weeks. That phase of outflows coincided with a slide of more than 1 percent in the rupee, which had weighed on returns for dollar-based investors.
Foreigners Buy Indian Shares After Three-Week Selloff
The recent turnaround underlines the strong relationship between currency movements and foreign portfolio flows into Indian stocks. Since exchange rate fluctuations directly influence returns for overseas investors, greater stability in the rupee is seen as a crucial factor in maintaining global interest in the country’s equity markets.Meanwhile, experts are of the view that the stock market could see a year-end rally as analysts point to the possibility of a seasonal Santa rally, supported by a mix of historical trends and favourable technical indicators.Data from ICICI Direct shows that the Nifty has delivered gains in 23 of the last 30 years, or about 77% of the time, during the period from December 20 to the end of the year. In those instances, the benchmark index recorded average returns of 2.8%, highlighting a consistent pattern of late-December strength.“This year-end momentum seen in more than 75% instances in the past three decades underscores the strength of the seasonal Santa rally,” said Dharmesh Shah, head of Technicals at ICICI Direct according to an ET report.
Santa Claus Rally
The index has already begun to show upward movement, rising nearly 0.81% over the last two trading sessions. On Tuesday, the Nifty closed at 26,177.15 in a largely flat session.Looking ahead, Chandan Taparia, head of Technical and Derivatives Research at Motilal Oswal Financial Services, expects the rally to extend further, with the benchmark likely to gain another 1% to 1.2% in the near term and approach levels close to 26,500.“The market has been forming a higher base over the past few sessions, suggesting that benchmark indices could see further upside in the near term,” he said. “Sentiment is supported by stable global cues, a subdued volatility index with the VIX below the 10 mark, and moderating FPI outflows, all of which point to a continued up move over the coming sessions.”(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India)
