FPIs Inject ₹8,100 Crore into Indian Equities in Feb 2026

A Significant Shift in Investor Sentiment

After three consecutive months of significant selling, foreign portfolio investors (FPIs) have made a strong return to the Indian equity market. In the first week of February 2026, FPIs turned net buyers, infusing more than ₹8,100 crore into Indian stocks. This decisive shift signals renewed confidence in India's economic prospects, largely driven by an improved global risk appetite and a pivotal trade agreement finalized between India and the United States.

Reversing a Three-Month Outflow Trend

The inflow recorded in early February marks a sharp reversal from the preceding quarter. According to depository data, FPIs had been consistent net sellers, pulling out substantial capital from the market. In January 2026, outflows reached ₹35,962 crore, following withdrawals of ₹22,611 crore in December 2025 and ₹3,765 crore in November 2025. The sustained selling pressure culminated in a total net outflow of ₹1.66 lakh crore (approximately $18.9 billion) from Indian equities for the calendar year 2025. This period was marked by significant headwinds, including volatile currency movements, heightened global trade tensions, and concerns over stretched equity valuations in the Indian market.

Key Catalysts for the Turnaround

Several factors contributed to this positive turnaround in foreign investor sentiment. The most significant trigger was the breakthrough in India-US trade negotiations. The new trade deal has eased geopolitical uncertainty and created a more predictable environment for businesses, directly boosting investor confidence. Vaqarjaved Khan, a senior fundamental analyst at Angel One, noted that this development, along with stabilizing US bond yields, helped fuel a market rally. Additionally, supportive measures announced in the Union Budget for FY26, including targeted fiscal stimulus and sector-specific incentives, have further strengthened the investment case for India.

Analyst Perspectives on the Inflow

Market analysts have interpreted the return of FPIs as a positive indicator for the market's health. Himanshu Srivastava, principal manager of research at Morningstar Investment Research India, stated that the recent buying reflects an improving risk appetite and renewed confidence in India's growth outlook. He added, "The sentiment was supported by easing global uncertainties, stability in domestic interest rate expectations, and optimism around India-US trade and policy developments." This view contrasts sharply with the risk-off environment that dominated January, which was characterized by elevated US bond yields that drew capital away from emerging markets like India.

The Role of Currency Stability

The Indian rupee's performance also played a crucial role in attracting foreign capital. VK Vijayakumar, chief investment strategist at Geojit Investments, highlighted that the appreciation of the rupee improved sentiment significantly. The currency strengthened from a record low of 90.30 against the US dollar before settling around 90.70 by the close of February 6. Vijayakumar anticipates that the rupee will stabilize and could appreciate further to below 90 per dollar by the end of March 2026. A stable or appreciating currency enhances returns for foreign investors, making Indian assets more attractive.

FPI Investment Flow Data

To provide a clear picture of the recent trend reversal, the following table summarizes FPI activity over the last few months.

Market Impact and Sectoral Gains

The fresh infusion of capital had an immediate positive impact on the Indian stock market. Benchmark indices moved higher, supported by broad-based buying interest. The inflows particularly benefited export-oriented sectors, which stand to gain from the improved trade relations with the US. Large-cap stocks, typically favored by institutional investors for their liquidity and strong fundamentals, also saw significant buying activity. The overall market sentiment has shifted from cautious to optimistic, as sustained FPI inflows are often seen as a leading indicator of market strength.

Cautious Optimism for the Path Ahead

While the return of FPIs is a welcome development, market participants remain cautiously optimistic. The sustainability of these inflows will depend on several factors. According to Vaqarjaved Khan, continued momentum in corporate earnings and the absence of new global trade tensions are crucial for attracting further investment. However, potential risks remain on the horizon. Lingering rupee weakness, elevated market valuations, and potential shifts in US economic policy could limit the upside and introduce volatility. Investors will be closely monitoring these variables in the coming weeks.

Conclusion

The return of FPIs as net buyers in February marks a significant and positive shift for Indian equities. The infusion of over ₹8,100 crore, driven by a favorable trade deal and improving economic sentiment, has broken a prolonged period of outflows. While the immediate outlook appears constructive, the path forward will be shaped by corporate performance, global economic stability, and domestic policy execution. The continuity of these foreign flows will be a key factor to watch for the market's trajectory in the near term.