Kamal Ghorui
Foreign portfolio investors (FPIs) infused Rs 22,615 crore into Indian equities in February, marking the highest monthly inflow in 17 months, supported by improving market valuations, strong corporate earnings and easing trade uncertainties, according to depository data reported by PTI.The inflows follow three straight months of heavy selling, during which FPIs withdrew Rs 35,962 crore in January, Rs 22,611 crore in December and Rs 3,765 crore in November.Despite the February rebound, overall foreign flows in 2025 remain negative, with FPIs pulling out a net Rs 1.66 lakh crore (USD 18.9 billion) from Indian equities amid currency volatility, global trade tensions, concerns over potential US tariffs and previously stretched valuations.Data showed that February’s investment was the strongest since September 2024, when FPIs had invested Rs 57,724 crore.Market experts attributed the turnaround largely to secondary market buying and renewed investor confidence. Vinit Bolinjkar, Head of Research at Ventura, said the inflow reflected “renewed foreign confidence post-2025 outflows.”Javed Khan, Senior Fundamental Analyst at Angel One Ltd, said three key catalysts supported the revival in flows. These included India-US trade agreements, correction in market valuations and strong corporate earnings performance. He noted that Q3 FY26 earnings grew 14.7 per cent, reinforcing confidence in India’s growth outlook.Varun Gupta, CEO of Groww Mutual Fund, also linked the inflows to improving earnings momentum and moderating valuations. He said early signs of easing global trade uncertainty, alongside India concluding multiple free trade agreements including with the EU and UK, helped improve investor sentiment.Sectoral trends showed FPIs turning aggressive buyers in financial services and capital goods stocks while continuing to reduce exposure to information technology companies. The IT segment witnessed outflows of Rs 10,956 crore amid concerns over artificial intelligence-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, analysts expect flows to remain supportive but cautious. Khan said March inflows are likely to stay positive, adding that upcoming Q4 earnings will be crucial in determining whether 15 per cent earnings growth in FY27 is achievable. Stability in the rupee below Rs 91 against the dollar also provides comfort to foreign investors, he said.Vijayakumar added that FPIs may adopt a wait-and-watch approach before significantly increasing allocations to emerging markets, though improving GDP growth prospects and healthy corporate earnings expectations for FY27 support medium-term inflows.He also cautioned that the ongoing Middle East conflict remains a key monitorable, particularly for its potential impact on crude oil prices and currency movements, which could influence investor sentiment going forward.
