Foreign portfolio investors (FPIs) have injected ₹3,346.94 crore into the Indian stock markets this week, spurred by positive market sentiment following the Reserve Bank of India's (RBI) recent rate cut. According to data from the National Securities Depository Limited (NSDL), the RBI's decision to lower rates bolstered investor confidence, leading to strong FPI inflows for the first three trading sessions of the week, spanning from June 9 to June 13.

However, this positive momentum was partially offset by escalating geopolitical tensions between Israel and Iran, which dampened investor sentiment towards the end of the week. On the last trading day, Friday, FPIs withdrew a significant ₹3,275.76 crore from Indian equities. This substantial outflow curtailed the net investment figure for the week to ₹3,346.94 crore.

The impact of geopolitical instability on investment decisions is well-documented. In times of such uncertainty, investors typically gravitate towards safer assets like gold, leading to a reduction in flows into emerging markets such as India.

Despite the positive inflows recorded during the week, the overall FPI investment trend for June remains negative. As per NSDL data, FPIs have withdrawn a net ₹5,402 crore from Indian equity markets so far this month.

The Reserve Bank of India's Monetary Policy Committee (MPC) on June 6th, took markets by surprise with a rate cut of 50 basis points, reducing the repo rate to 5.5 per cent. This move was intended to boost investor confidence and stimulate economic activity.

In contrast to June, May witnessed robust foreign portfolio investment (FPI) inflows, which remained positive at ₹19,860 crore. This made May the best-performing month thus far in 2025 with respect to foreign investment.

Earlier in the year, data revealed a trend of net selling by FPIs. They sold stocks worth ₹3,973 crore in March and had significantly larger outflows in January and February, selling equities worth ₹78,027 crore and ₹34,574 crore, respectively.

The Indian stock market in 2025 has been subject to global influences, with the Sensex having fallen significantly in a short amount of time. Rising bond yields in the US and a stronger dollar have made American assets more attractive, contributing to foreign investors pulling out around ₹1.27 trillion so far in 2025. Geopolitical tensions and trade wars have also played a role, with conflicts affecting crude oil prices and, in turn, India's import bill and inflation.

Despite these challenges, India's economic survey for 2024-25 projects GDP growth between 6.3% and 6.8% for FY26, with 6.4% real GDP growth in FY25. Increased capital expenditure, rising exports, and strong Forex reserves signal commitment to long-term growth.

While FII selling in early June 2025 caused market correction, opportunities remain in banking, pharma, and capital goods sectors, supported by India's GDP growth. Morgan Stanley's Sensex target of 105,000 by December 2025 indicates confidence in India's long-term growth.