FIIs Return With A Bang: India’s Market Soars On US-India Trade Deal Hopes

India’s benchmark stock indices saw a positive turn on Tuesday, with the Nifty 50 and the BSE Sensex rising. The upward movement was largely fueled by optimism surrounding a potential trade deal between India and the U.S., along with continued foreign investments in Indian markets.

Foreign portfolio investors (FPIs) have been particularly active, investing $4.1 billion in the past nine sessions, marking the longest buying streak since July 2023.

Over this period, the Nifty 50 has gained 6.6%. Kranthi Bathini, director of equity strategy at Wealthmills Securities, noted, "The possibility of a bilateral deal with the U.S. is a real positive and could spur further buying interest in Indian markets, especially among foreign investors."

U.S. Treasury Secretary Scott Bessent added to the optimism, suggesting that one of the first trade deals could be with India, potentially as soon as this week or next. His comments pointed to the strong prospect of a U.S.-India trade agreement, which analysts believe could further bolster investor sentiment.

Also Read: Why Are Defence Stocks Rising Today?

India and Pakistan Tension

The positive market momentum came despite concerns over rising tensions between India and Pakistan. The Indian market largely shrugged off comments from Pakistan’s defence minister suggesting a military incursion by India was imminent after a deadly militant attack in Kashmir.

In the broader market, mid-cap and small-cap stocks also saw gains, with the mid-cap index rising by 1.1% and the small-cap index increasing by 1.3%. Notable stock performances included Samvardhana Motherson and Sona BLW, both rising by 3%, while Bharat Forge gained 2.5%. Reliance Industries (RELI.NS) added 1.4%, extending its 5.3% surge from the previous day following a positive earnings report.

Indian Markets Resilience

Foreign investors have returned to Indian markets largely due to the country's relative resilience to global trade tensions, especially when compared to the U.S. and China. G Chokkalingam, founder and head of research at Equinomics Research, explained, "The main reason for FPIs coming back into Indian markets is that the U.S. and China are more vulnerable to a global trade war than India, which is projected to still remain the fastest growing large economy in fiscal year 2026."

Analysts believe the continued inflow of foreign funds could also be driven by attractive valuations in India’s large-cap stocks and strong earnings from heavyweights like Reliance. The Indian market’s resilience amid global uncertainties and expectations of a U.S.-India trade deal has further bolstered investor confidence.

While markets experienced sustained outflows of $25.3 billion between October 2024 and March 2025 due to global trade uncertainty and moderating growth, the current inflow signals a positive shift. As of Monday's close, the Nifty was 7.4% below its all-time high set on September 27, 2024.