Foreign Investors Stage Dramatic Reversal with Rs 19,675 Crore Equity Infusion
In a significant shift, Foreign Portfolio Investors (FPIs) executed a sharp turnaround in early February, injecting a substantial Rs 19,675 crore into Indian equities during the first fortnight. This influx marks a notable departure from the preceding three months of heavy outflows, signaling a potential revival in foreign investor confidence.
From Sustained Outflows to a February Surge
The recent buying spree comes on the heels of a prolonged period of withdrawal. Data from depositories reveals that FPIs had been net sellers for three consecutive months, pulling out Rs 35,962 crore in January, Rs 22,611 crore in December, and Rs 3,765 crore in November. This consistent exodus had raised concerns about foreign sentiment toward Indian markets.
2025 Sees Steep Net Outflows Despite Recent Buying
Despite the positive momentum in February, the overall picture for 2025 remains bleak. FPIs have withdrawn a net Rs 1.66 lakh crore ($18.9 billion) from Indian equities so far this year, positioning it as one of the worst phases for foreign fund flows in recent memory. Earlier selling was attributed to a combination of factors, including volatile currency movements, escalating global trade tensions, fears over potential US tariffs, and stretched equity valuations that made investors cautious.
Key Drivers Behind the February Influx
Analysts point to several critical factors that spurred the recent buying activity. According to Himanshu Srivastava, principal manager–research at Morningstar Investment Research India, "easing global macro concerns, particularly softer US inflation data" played a pivotal role. This development fostered positive sentiment around the interest rate cycle, helping to stabilize bond yields and the US dollar, thereby enhancing risk appetite for emerging markets like India.
Srivastava further emphasized that steady domestic macroeconomic indicators, stable inflation, and corporate earnings broadly in line with expectations have reinforced confidence in India's growth trajectory.
Echoing these views, Vaqarjaved Khan, senior fundamental analyst at Angel One, highlighted additional catalysts: "the US-India trade deal, a supportive Union Budget 2026 with fiscal stimulus measures, easing global trade uncertainties, and stable domestic interest rates" collectively triggered the inflows. These elements have created a more favorable environment for foreign investment.
Selling Pressure Persists Amid Positive Sessions
However, the headline inflow figure masks underlying volatility. Despite being net buyers in seven of the eleven trading sessions up to February 13, FPIs turned sellers on four occasions, resulting in a net sale of Rs 1,374 crore for the month so far. This contradiction is largely due to a sharp sell-off of Rs 7,395 crore on February 13, coinciding with a 336-point decline in the Nifty 50.
The week also witnessed heavy selling in IT stocks, exacerbated by the so-called "Anthropic shock." VK Vijayakumar, chief investment strategist at Geojit Investments, suggested that FPIs likely offloaded IT stocks aggressively in the cash market, as the IT index plunged 8.2 percent during the week ending February 13.
Outlook and Implications
The February turnaround, while encouraging, underscores the fragile nature of foreign investor sentiment. The interplay of global macroeconomic trends, domestic policy measures, and sector-specific shocks continues to shape FPI behavior. As markets navigate these dynamics, the recent infusion offers a glimmer of hope, but sustained inflows will depend on continued stability in both international and domestic economic conditions.
