Foreign global funds are increasingly investing in Indian assets, with strong inflows in rupee bonds and signs of changing sentiment in equities as the recovery gains momentum. In the week ending March 21, foreigners purchased $515 million worth of stocks, marking the first weekly inflow of the year. They have also invested $3 billion in local bonds so far in March, the highest amount since 2017. This influx of funds has led to the NSE Nifty 50 Index and the rupee erasing their year-to-date losses on Monday.

Indian assets, which had been trailing behind most major markets, are now experiencing a revival due to improving economic indicators, liquidity measures by the central bank, and expectations of an interest rate cut next month. With China and US equities losing momentum, investors are turning to India's domestically-driven market as a viable alternative to seek refuge from US trade policies.

Amit Goel, co-founder and chief global strategist at Pace 360, noted that while foreign investors are showing reluctance towards China and a slowdown in the US market, India remains a long-term bullish prospect for many. Despite the modest inflow into stocks compared to significant outflows since January, the shift in sentiment is a positive development after a substantial market downturn that wiped out trillions of dollars in value.

The rapid recovery in early March has positioned Indian equities as top performers this month among over 90 global indexes tracked by Bloomberg. This optimistic trend has spilled over into the debt market, where the 10-year sovereign bond yield hit a three-year low. The rupee has emerged as the best-performing currency in Asia this month, following multiple record lows earlier in the year.

However, foreign inflows into Indian assets are still vulnerable, especially with the upcoming April 2 deadline for reciprocal tariffs set by the Trump administration. The progress in equities will be tested by the upcoming earnings reports for the March quarter and expectations of stronger growth backed by the central bank's monetary support. Despite the recent gains, the Nifty remains about 10% below its peak in September.

Exporters selling dollars as the fiscal year ends, due to unexpected rupee appreciation, is currently supporting the currency.