Foreign portfolio investors (FPIs) infused Rs 22,615 crore into Indian equities in February, marking the highest monthly inflow in 17 months, reversing three consecutive months of heavy selling amid improving valuations, an interim India-US trade deal and strong third-quarter earnings growth.
The latest buying follows net outflows of Rs 35,962 crore in January, Rs 22,611 crore in December and Rs 3,765 crore in November, according to depository data.
Despite February’s inflow, FPIs have withdrawn a net Rs 1.66 lakh crore (USD 18.9 billion) from Indian equities in 2025 so far, making it one of the weakest phases for foreign flows. Earlier withdrawals were triggered by volatile currency movements, global trade tensions, concerns over potential US tariffs and stretched equity valuations.
February’s Rs 22,615 crore investment was the strongest since September 2024, when inflows had touched Rs 57,724 crore.
Vinit Bolinjkar, Head of Research at Ventura, said the inflow was largely driven by secondary market buying, signalling renewed foreign confidence after sustained selling in early 2025.
Javed Khan, Senior Fundamental Analyst at Angel One Ltd, identified three key catalysts behind the turnaround. These included progress on India-US trade agreements, correction in domestic market valuations and a 14.7 per cent growth in Q3 FY26 corporate earnings, reinforcing confidence in the growth trajectory.
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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 free trade agreements, including those with the European Union and the United Kingdom.
Sectorally, FPIs were aggressive buyers in financial services and capital goods, while continuing to trim exposure to information technology stocks. The IT segment recorded 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, with fourth-quarter earnings providing clarity on whether 15 per cent earnings growth in FY27 is achievable. He added that rupee stability below Rs 91 to the dollar offers comfort on returns.
Vijayakumar indicated that FPIs are likely to maintain a cautious stance before significantly increasing exposure to emerging markets. However, improving GDP growth prospects and a healthy corporate earnings outlook for FY27 could support medium-term inflows.
Market participants are also monitoring geopolitical developments in the Middle East. Any sustained rise in crude oil prices or currency volatility may influence foreign investment sentiment in the near term.
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