FIIs surge with ₹7,470 crore purchase – Passive investment plays a key role

Foreign Institutional Investors (FIIs) made a strong return to the Indian stock market, registering their highest equity purchase of FY25 on March 21, and then on March 24, 2025. This surge in FII activity was accompanied by a sharp market rally, adding ₹22 lakh crore in investor wealth, and the rupee posted its best weekly gain in two years.

FII Buying Trend and Passive Investments

However, a large portion of this inflow—estimated to be between $1.4 billion to $1.6 billion—was driven by passive investments related to FTSE’s index rebalancing. With 14 Indian companies being added to the FTSE All-World Index, the inflows were more mechanical rather than stemming from active investor sentiment.

Domestic Investors' Role

Meanwhile, Domestic Institutional Investors (DIIs) were net sellers, offloading shares worth ₹3,202 crore. Despite the strong purchase by FIIs, the overall foreign investor sentiment toward Indian equities remains weak, as indicated by their continued net selling outside of the FTSE-linked inflows.

Market Surge and Investor Wealth Growth

The renewed FII buying spree triggered a sharp rally in Indian equities, with the Nifty 50 soaring over 6% this week—its best performance since February 2021. Both the Midcap and Smallcap indices outperformed, climbing over 7% and 8%, respectively—their strongest week since 2020. This surge in market activity resulted in a massive ₹22-lakh crore increase in investor wealth, bringing the total market capitalization of BSE-listed firms back to above ₹400 lakh crore, currently standing at ₹412 lakh crore.

Rupee's Strong Performance

The Indian rupee also gained momentum, closing at ₹86 per US dollar on March 21, up by 36 paise on the day and 123 paise over the week. This marked its best weekly advance since January 2023, fueled by strong foreign inflows and the equity market rebound.

Outlook for the Rupee

Analysts remain optimistic about the rupee's short-term trajectory but warn that rising crude oil prices could limit its further appreciation.