The month of April 2025 was the first full month of positive FPI flows the calendar year 2025. It may be recollected that FPIs were net sellers to the tune of $(13) billion in January and February combined. Then in March, there was a turnaround of FPI flows in the second fortnight, but the FPIs were still net sellers in the month to the tune of $(402) million. April 2025, once again, save heavy selling to the tune of $(3.96) billion in the first fortnight, but this was more than offset by net FPI buying to the tune of $4.49 billion in the second fortnight. For April overall, FPIs net bought equities worth $528 million.  

There were several factors that triggered this rebound in FPI buying in April. The first positive was the reciprocal tariffs being put off for a period of 90 days. That took away the immediate risk for the markets. Secondly, the consumer inflation for the month of March 2025 came in at 3.34%. This is a bonus as it comes on top of the IMD and SKYMET projecting normal rainfall in India this year. That should keep food inflation in check. 

The third factor was the clearly dovish stand taken by the RBI MPC. It not only cut rates for a second time in April, but also hinted at a third rate cut in June. As yield spreads narrow, it is likely to shift FPI money from debt to equities. Above all, the Q4 results, were expected to display a lot of pressure, but most numbers met market expectations. 

It was once again a case of BFSI being the top buy candidate for FPIs and IT being the top sell candidate. Several India-oriented sectors witnessed positive flows. 

1. In terms of inflows, BFSI continued to attract flows; both as a beta play on the India story and the perfect proxy for a sector not impacted by global volatility.
2. Telecom, FMCG, and Consumer Services (likes of Eternal), are examples of revival in urban demand, greater digitization, and the trend towards domestic dependence.
3. What about FPI outflows. Once again, IT took a hit on shaky guidance numbers and the likely risk that IT spending could slow down among Western corporates.
4. Among others key sectors witnessing selling; metals & mining took a hit on uncertain Chinese recovery, while the 25% tariffs dented sentiments around auto sector. 

As we write, the border situation is tense and there is geopolitical risk building up. It remains to be seen, how the FPIs react to this new layer of risk in May 2025.