FPIs pump in $2.3 billion in February

After being net sellers for a long time, foreign portfolio investors (FPIs) seem to be making a comeback into the Indian market in February, though in a small way. The 11-day rolling data of FPI net investments in equities till Wednesday shows the highest inflow of $2.3 billion (Rs 20,034) crore since October-end, as per data from the National Securities Depository (NSDL). While India’s recent trade agreements with the US, the European Union, and over 15 countries, along with hopes of earnings revival, are key triggers for FPIs, analysts echoed that it is too early to say whether there has been a change in FPI’s stance, as India’s valuation is still pricey. Valuation Barrier “We have gone through the worst, but we are still a little pricey for foreigners to come and buy stocks,” said Kenneth Andrade, chief investment officer at Old Bridge Asset Management. However, unlike last year, India’s performance is unlikely to have a stark deviation from the rest of the world and emerging markets in 2026, he said. Rahul Arora, chief executive officer of Ashika Institutional Equities, said he does not expect FIIs to come back in a hurry. Assuming 12% growth, the effective return for an FPI would be 5.5-6% because of the currency depreciation of 3-4% per year, 12.5% capital gains tax, hike securities transaction tax, and 2% inflation in their country, he added. The revival in corporate earnings growth to 18-20% is a key factor that can bring major foreign inflows. Meanwhile, one of the key positives is that the number of earnings upgrades are far more than downgrades, he added. Some like Devina Mehra, chairman-cum-managing director of First Global said that there is no co-relation between FII flows and the direction of the market. The implicit assumption while trying to estimate foreign flows is that the market rises when FIIs buy and it goes down when they sell, she added. Domestic Resilience The good news is that the Indian market is not primarily reliant on foreign investments in recent times because of the massive inflows from domestic institutional players. In 2025, when Indian markets saw one of the worst FPI outflows from equities at over ₹1.65 lakh crore, domestic players supported the market by infusing the highest-ever ₹7.88 lakh crore. However, most believe that for Indian markets to have a strong rally in 2026 after a subdued 2025, both foreign and domestic players will have to contribute. While the near-term picture still remains cautious, experts are optimistic about the medium-to-long term performance of the Indian market. HDFC Mutual Funds said near-term risks include risk of geo-political flare ups and cyclical moderation in corporate earnings. However, it is optimistic about the medium-long term growth on the back of key trade deals, attractive domestic growth outlook, healthy corporate profitability, and supportive pro-growth policies such as relief in income tax and goods and services taxes, the fund house said in its market review report for January.