Cross-border asset managers are redirecting capital back into Mumbai as cooling U.S. technology trades and lower crude import costs bolster the domestic economic outlook. This aggressive portfolio rebalancing has reversed a prolonged underperformance streak for overseas participants while beating major competing indices across Asia and the West. The resulting currency appreciation is further magnifying total returns, creating a reinforcing cycle that encourages institutions to unwind their defensive short exposures. Specifically, foreign portfolio investors poured a net ₹60,698 crore into domestic shares during the first 11 days of November alone.
Key points
Dollar-denominated gains on Indian equities have outstripped major global stock indices l…: Dollar-denominated gains on Indian equities have outstripped major global stock indices located across the United States, Japan, South Korea, and Hong Kong.
Foreign institutions are actively closing out short positions and correcting underweight…: Foreign institutions are actively closing out short positions and correcting underweight portfolio allocations due to stabilizing oil prices and robust domestic earnings.
The combination of steady international crude prices and ongoing fund rebalancing is proj…: The combination of steady international crude prices and ongoing fund rebalancing is projected to maintain support for both the rupee and equity inflows through year-end.
Sources checked by our analysis pipeline: 1
Mumbai: A surge in foreign inflows has helped the rupee recover, boosting returns on Indian equities in dollar terms relative those in rupee terms and reversing a prolonged period of underperformance for overseas investors.
The Nifty 50 rose 11% in dollar terms between 30 October and 11 November, compared with a 9.5% gain in rupee terms. Dollar returns matter particularly to foreign investors, who had turned cautious on India amid subdued market performance, with the rupee’s depreciation further eroding their returns when converted into dollars.
In the year through 30 October, the Nifty 50 delivered negative dollar returns of 16.77%, significantly worse than its 10.92% decline in rupee terms. That trend has reversed since 30 October, with dollar returns now outpacing rupee returns.
Foreign portfolio investors (FPIs) have net bought shares worth ₹60,698 crore in the first 11 days of November, the highest monthly inflow so far since December 2023, NSDL data. FPIs stepped up their purchases in Indian markets from 30 October and market participants expect FPI purchases to gather further momentum in the coming weeks.
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