Foreign Investors Return to Indian Markets Amid Trade Deal Clarity
Foreign Portfolio Investors (FPIs) and Foreign Institutional Investors (FIIs) are showing renewed interest in the Indian stock market, marking a gradual return after months of hesitation. This shift comes as increased clarity surrounding the India-US trade agreement has alleviated a major risk factor that previously kept international investors on the sidelines.
Recent Investment Patterns Show Positive Momentum
Foreign institutional investors demonstrated their renewed confidence by purchasing shares worth ₹943.81 crore on Wednesday, February 11. This activity reflects a noticeable change in FII flows throughout February. Data reveals that up until February 6, FIIs had already been net buyers of equities totaling ₹2,645 crores. Over the past four trading sessions, foreign investors have maintained a positive stance, being net buyers in three of those sessions.
This represents a significant departure from January's trends, when selling by foreign portfolio investors persisted, though the intensity of selling decreased substantially toward the month's end ahead of the Union Budget 2026.
Sectoral Analysis Reveals Divergent Trends
A closer examination of sectoral flows in January 2026 reveals a complex picture of foreign investment activity across different industries.
Metals & Mining Sector Leads Inflows
The Metals & Mining sector emerged as the standout performer, recording the largest FPI inflow of ₹11,530 crore in January 2026 according to NSDL data. This represents a dramatic reversal from previous months, with the sector experiencing a net outflow of ₹2,382 crore in January 2025, following a reversal from inflows of ₹2,984 crore in December 2025. The January 2026 inflows significantly exceed the long-term average of ₹145.7 crore, as reported by brokerage firm PL Capital.
Sectors Facing Significant Outflows
Despite the overall positive trend, several sectors continued to experience substantial outflows from foreign investors in January 2026.
FMCG Sector: The Fast-Moving Consumer Goods sector has seen ongoing FII and FPI outflows, with ₹5,428 crore leaving in January 2025 and ₹5,844 crore in December 2025. These outflows escalated to ₹7,497 crore in January 2026, though these amounts remain considerably lower than the long-term average outflow of ₹979.8 crore according to PL Capital analysis.
Healthcare Sector: Foreign investors withdrew ₹4,372 crore from the healthcare sector in January 2025, followed by outflows of ₹2,994 crore in December 2025. The outflows increased sharply to ₹6,162 crore in January 2026, well below the long-term average inflow of ₹568 crore as reported by PL Capital.
Automobile and Auto Components: This sector experienced significant outflows totaling ₹5,823 crore in January 2025, followed by ₹2,045 crore in December 2025. The pattern persisted into January 2026 with an additional outflow of ₹3,594 crore, though these remain significantly below the long-term average inflow of ₹64.1 crore.
Consumer Durables: After experiencing outflows of ₹3,800 crore in January 2025 and inflows of ₹599 crore in December 2025, the Consumer Durables sector returned to outflows in January 2026 with ₹1,050 crore leaving. These outflows continue to be lower than the long-term average outflow of ₹549.6 crore.
Broader Context and Investment Climate
January 2026 witnessed a significant overall outflow by FPIs of ₹33,300 crore, the largest since August 2025 according to PL Capital analysis. The sectors of FMCG, healthcare, and consumer services experienced the most substantial outflows during this period.
The IT sector has been facing consistent outflows since April 2025, with only brief periods of inflows in June 2025 and December 2025 interrupting this trend, as per PL Capital analysis.
The improved clarity around the India-US trade agreement appears to be the primary catalyst for the recent shift in foreign investor sentiment. As key results become more defined, international investors are regaining confidence in the Indian market's stability and growth prospects.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies. Investors are advised to consult with certified experts before making any investment decisions.
