Foreign Investors Return to Indian Markets Amid US-India Trade Deal and Tax Changes

After nearly two years of sustained selling, foreign institutional investors (FIIs) are showing signs of returning to Indian equities, with inflows turning positive by late 2024. This shift follows easing global liquidity pressures and improved market sentiment, partly influenced by a recent US-India trade deal that rolled back tariffs, boosting investor confidence and the rupee. Meanwhile, a hike in Securities Transaction Tax aims to reduce speculative trading without deterring long-term investors, potentially enhancing market quality amid ongoing valuation and currency considerations.