Bank of Baroda Forecasts $20-25 Billion FPI Inflows in FY25

FPI Flows in India Projected To Be Positive

A report by Bank of Baroda predicts that foreign portfolio investment (FPI) flows into India will stay positive in FY25, with expected inflows ranging from US$ 20-25 billion.

While there has been a recent outflow from Indian markets, the report indicates that this is a short-term trend, and a reversal in FPI inflows is expected in FY25 due to the country's robust macroeconomic fundamentals.

"Given India's strong macro fundamentals, the recent round of FPI outflows is only likely to be temporary," the report said. For FY2025, we expect FPI inflows to remain positive at USD 20-25 billion in FY25".

External And Fiscal Deficits Under Control

The report also highlighted that while India's external and fiscal deficits are well-managed, economic growth remains strong. Additionally, the Reserve Bank of India (RBI) has accumulated substantial foreign exchange reserves exceeding USD 675 billion, which can be strategically used to stabilize the domestic currency if necessary.

The recent capital outflow by foreign investors from emerging markets, including India, is a natural reaction to global developments.

This includes the U.S. This includes a reassessment of expectations around the Federal Reserve's rate cut cycle and political uncertainties following Donald Trump's re-election in the United States.

India Remains A Preferred Destination For Foreign Investors

The report suggests that while the U.S. may experience outflows, these are expected to reverse once the market gains clarity on fiscal and monetary policies.

It also highlighted that India continues to be a favored destination for foreign investors, driven by its robust economic growth outlook. Even under conservative projections, India's GDP growth is estimated to exceed 7 percent, positioning it as one of the fastest-growing economies worldwide.

For investors seeking higher returns, the report emphasizes that emerging markets like India continue to be appealing in the long run.

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