Fueled by trade deals and strong earnings, foreign portfolio investors (FPIs) are back, injecting over Rs 22,615 crore into Indian equities in February, marking a significant turnaround after months of heavy selling.
Illustration: Dominic Xavier/Rediff
Key Points
- Foreign portfolio investors (FPIs) invested Rs 22,615 crore in Indian equities in February, the highest monthly inflow in 17 months.
- The surge in FPI investment was fueled by the interim India-US trade deal, corrections in domestic market valuations, and robust Q3 corporate earnings.
- Financials and capital goods sectors saw aggressive buying from FPIs, while the IT sector experienced outflows due to concerns over AI disruption.
- Analysts expect positive FPI flows to continue in March, contingent on Q4 earnings and rupee stability.
- Geopolitical factors, particularly the Middle East conflict and its impact on crude prices and currency movements, remain key factors influencing FPI decisions.
Foreign portfolio investors (FPIs) infused Rs 22,615 crore into Indian equities, marking the highest monthly inflow in 17 months, driven by the interim India-US trade deal, correction in domestic market valuations and robust third-quarter corporate earnings.
The latest buying follows three consecutive months of heavy selling.
FPIs pulled out Rs 35,962 crore in January, Rs 22,611 crore in December and Rs 3,765 crore in November, according to data from the depositories.
Overall, FPIs have withdrawn a net Rs 1.66 lakh crore ($18.9 billion) from Indian equities in 2025, making it one of the worst periods for foreign flows. The outflows were triggered by volatile currency movements, global trade tensions, concerns over potential US tariffs and stretched equity valuations.
According to the data, FPIs invested Rs 22,615 crore in February. This was the highest monthly inflow since September 2024, when they had invested Rs 57,724 crore.
The inflow was driven by secondary market buying, signalling renewed foreign confidence post-2025 outflows, said Vinit Bolinjkar, head of research at Ventura.
Factors Driving the FPI Inflow
Javed Khan, senior fundamental analyst at Angel One Ltd, said three key catalysts supported the inflow.
These included India-US trade agreements and corrections in India’s market valuation.
Additionally, Q3 FY26 earnings grew 14.7 per cent, suggesting confidence in the growth narrative.
Echoing similar views, Varun Gupta, CEO of Groww Mutual Fund, attributed the renewed inflows to improving earnings momentum, moderation in valuations from peak levels and early signs of easing trade uncertainty, with India concluding multiple FTAs, including those with the EU and UK.
Sectoral Performance and Future Outlook
Sectorally, FPIs were aggressive buyers in financials and capital goods, while continuing to pare exposure to the IT sector.
The segment saw outflows of Rs 10,956 crore amid concerns over AI-led disruption.
FPIs had sold heavily in IT stocks due to the Anthropic shock and continued weakness in the segment. However, they turned buyers in financial services and capital goods,” said VK Vijayakumar, chief investment strategist at Geojit Investments.
Looking ahead, Khan said March flows are expected to remain positive.
Q4 earnings will determine whether 15 per cent earnings growth in FY27 is achievable, while rupee stability below Rs 91 to the dollar provides comfort on returns.
Vijayakumar said FPIs are likely to adopt a wait-and-watch approach before increasing exposure to emerging markets.
However, improving GDP growth prospects and a healthy corporate earnings outlook for FY27 bode well for medium-term flows.
Meanwhile, the ongoing conflict in the Middle East has triggered a risk-on sentiment in financial markets.
Its impact on crude prices and currency movements remains a key monitorable, he added.
