India Poised for Surge in FII Inflows as Corporate Profit to GDP Expected to Peak in FY26-FY27

India is on track to experience a significant increase in Foreign Institutional Investor (FII) inflows in FY26, driven by projections that corporate profit to GDP will reach its highest levels in FY26-FY27, according to a report by Sharekhan, a leading financial services firm.

The report highlights a substantial rise in corporate profits in recent years, attributing this growth to favorable economic conditions. It states, “Corporate profit to GDP is likely to be at its best in FY26-FY27, which could be a big trigger for sharp FII flows into Indian equities.”

corporate profits which were recorded at Rs 3.53 trillion in FY20, are expected to surge to Rs 15.38

Data from the report indicates that corporate profits, which were recorded at Rs 3.53 trillion in FY20, are expected to surge to Rs 15.38 trillion by FY25 and further to Rs 20.84 trillion by FY27. This represents a remarkable Compound Annual Growth Rate (CAGR) of 29 percent since FY20, translating to a 5.9-fold increase over seven years.

By FY27, corporate profit to GDP is projected to rise to 5.3 percent, a key indicator of economic health. This anticipated growth, combined with India’s strong economic performance, is expected to attract robust FII inflows into Indian equities, thereby bolstering the stock market.

The report also notes that India’s economy continues to outperform global peers, including China, as evidenced by its position in the Emerging Market (EM) MSCI index. It emphasizes India’s advantageous position due to its consistent and superior growth rate on the global stage, stating, “India is among the few economies that are set to achieve a higher growth rate over 2023-2028.”

Looking ahead, the report expresses optimism for the next 3-5 years of economic expansion, driven by three key pillars: credit, capital expenditure (capex), and consumption. The firm is particularly bullish on sectors such as industrials, engineering, real estate, and banking, financial services, and insurance (BFSI), as well as select consumer stocks.

However, the report also highlights that export-driven sectors, including textiles, garments, IT, and pharmaceuticals, are expected to outperform benchmark indices in 2025 due to tactical positioning and global market dynamics.

With corporate profitability reaching historic highs and the economy on a steady growth trajectory, the report concludes that India is well-positioned to attract global investments, solidifying its status as a key player in the global economic landscape.