Foreign portfolio investment (FPI) inflows into India are expected to remain positive in FY25, with projections of USD 20-25 billion, according to a report from the Bank of Baroda. The report suggests that recent outflows from Indian markets are a short-term phenomenon, driven by global uncertainties, but a rebound is anticipated due to the country’s strong macroeconomic fundamentals.

“Given India’s robust macro fundamentals, the recent bout of FPI outflows is likely to be only temporary. For FY25, we expect FPI inflows to be positive at USD 20 to 25 billion,” the report emphasized.

India’s economic resilience, bolstered by controlled external and fiscal deficits and a substantial foreign exchange reserve of over USD 675 billion, provides confidence in the nation’s financial stability. The Reserve Bank of India’s strategic reserves can be utilized to support the domestic currency if necessary.

The report attributed the recent capital outflow to a knee-jerk reaction to global developments, including uncertainty surrounding the U.S. Federal Reserve’s rate cut cycle and political concerns following Donald Trump’s re-election. Despite these external shocks, the report foresees a reversal of outflows as markets adjust to clearer U.S. fiscal and monetary policies.

India remains a preferred investment destination, underpinned by GDP growth estimates of over 7%, positioning the nation as one of the fastest-growing economies worldwide. “Emerging markets continue to be attractive for investors seeking higher returns. India’s growth fundamentals remain on a strong footing,” the report stated.

Overall, the positive outlook for FPI inflows is expected to support the Indian Rupee and strengthen financial markets. India’s strategic policy framework and economic fundamentals make it well-poised to attract significant foreign investments in the next fiscal year.

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