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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. A cooling AI trade in the US and easing oil prices, following Republican losses in the midterm elections, have also improved the appeal of Indian equities. The rupee has appreciated 1.5% since 30 October to ₹93.69 against the dollar as of 11 November, recovering after touching record lows earlier this year.
The current inflows into India could be driven by investors covering their India ‘anti-AI’ short positions, as global and emerging-market funds rebalance their underweight allocations to the country, said Arvind Chari, chief investment strategist at Q India UK, an affiliate of Quantum Advisors India that helps foreign investors allocate money to India.
The clinching factor for the rupee is the recent FPI inflow. If crude trends below $100 per barrel, the rupee could appreciate to as much as 93 to the dollar by the year-end,” said Madan Sabnavis, chief economist at Bank of Baroda. The downside, however, could be limited to around 95 if FPI flows weaken or oil prices rise to $100 in the near term, he added.
A stronger economy and improving corporate earnings attract foreign investors, supporting capital inflows and the rupee. A stronger rupee, in turn, improves dollar returns for overseas investors, making Indian equities more attractive and potentially encouraging further inflows.
The return of foreign money to India comes amid a correction in global artificial intelligence (AI) stocks, which had attracted significant investor interest.
The benchmark Nifty 50 has delivered 11.02% in dollar returns since 30 October, outperforming major global markets, including the US, Japan, Hong Kong and South Korea, which have posted negative returns over the same period, according to Bloomberg data. The MSCI World Index, meanwhile, has delivered -1% returns.Peaking AI trade
In the US, the AI-heavy Nasdaq 100 and S&P 500 indices have fallen 2.74% and 1.31%, respectively, since 30 October. Markets with greater exposure to individual AI-linked stocks have seen steeper declines, with South Korea’s Kospi and Taiwan’s Taiex falling 9.4% and 4.5%, respectively in dollar terms.
“The AI trade, to my mind, has peaked for now, and so whenever there is a rally, there will be caution on that trade,” said Nirmal Jain, founder of the IIFL Group. This could channel more durable FPI inflows into India. Alongside a decline in crude oil prices, that would provide further support to the rupee and create a virtuous cycle of stronger foreign investor returns, Jain added.
FPI inflows into India could sustain asinvestorsremain significantly underweight on the country, said Jay Kothari, global head of international business at DSP Mutual Fund. Even a shift from an underweight to a neutral allocation could bring in an additional $20-30 billion, of which around $3-4 billion has already started flowing in, he added.
“After two difficult years, India’s earnings are recovering, valuations have moderated, oil prices are stabilising and the rupee is improving. With India offering both GDP and earnings growth, it is emerging as an attractive destination for global investors,” Kothari said.
That picture is now changing, with corporate earnings showing signs of recovery. The 48 Nifty 50 companies that have announced their September-quarter results so far reported a 26% year-on-year increase in net profit and 19% growth in net sales in Q2FY27, according to Mint’s analysis. This marks a significant improvement from the year-earlier quarter, when the same companies reported profit growth of just 3% and sales growth of 5%.
HSBC Global Investment Research has upgraded India to overweight from neutral. Citi raised its Nifty 50 target to 28,000 from 26,000, implying about 12% upside, and expects corporate earnings to compound at 15-16% annually over FY26-FY28.
Srushti is a markets reporter at Mint. She writes on equity markets, and her areas of coverage range from brokers and exchanges to mutual funds and the fast-evolving alternatives space, including GIFT City, from the financial capital of India. She has an experience of over three years in journalism, and has previously worked at Moneycontrol. She has an undergraduate degree in mass communication and a postgraduate diploma in business and financial journalism from Asian College of Journalism, Chennai.<br><br>Srushti prefers meeting people from the industry over making calls. Her work aims to drive impact—her story on illegal gold imports, for instance, caught the government’s attention and contributed to a policy shift. She specialises in turning complex market data into clear, engaging stories so even her grandmother could understand futures and options.<br><br>Outside of the newsroom, she enjoys spending money on jewellery and watching thriller films—especially the kind that keep her awake at night. She spends 1.5 hours a day commuting in Mumbai locals, listening to horror podcasts on her way to work. She’s also very talkative—so reach out only if you have lots of time.
Ram Sahgal is a deputy editor at Mint. He has over 20 years of experience in journalism, with previous roles at The Intelligent Investor, Bombay Times, The Economic Times, and The New Indian Express. Between his media roles, he briefly worked at a commodities exchange before returning to his true passion, business journalism. Ram graduated in liberal arts from St Xavier’s College, Mumbai, where he studied films, which explains his move to Bombay Times, where he covered the film industry during the rise of Sunny Deol and Sanjay Dutt. He took a leap of faith to transfer to The Economic Times, and thanks to his restless mind, later moved to cover the commodities beat. Over the past three years, Ram has been tracking the stock markets at Mint. His focus areas include writing about market infrastructure institutions, brokerages, derivatives, and related regulations. His hobbies include spotting trains and understanding the locomotives that power them. In his free time, he takes his octogenarian mother out for drives and goes to the cinema with her on weekends. If he has a dream, it is to write a screenplay for a movie. For now, he enjoys viewing market data on NSE and BSE, observing the shifting mood of Mr Market, and conversing with market experts.
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