Foreign Portfolio Investors (FPIs) turned net buyers in the Indian stock market in February, snapping a three-month streak of outflows, and recording their highest monthly inflows in the past sixteen months. However, despite the return of foreign inflows, benchmark indices — the BSE Sensex and the NSE Nifty 50 — ended the month marginally lower.
FPIs net bought Indian equities worth ₹22,615 crore in February, according to data from National Securities Depository Limited (NSDL). Previously, FPIs had invested ₹57,724 crore in September 2024.
The February inflows follow significant net FPI outflows of ₹35,962 crore in January 2026, ₹22,611 crore in December 2025, and ₹3,765 crore in November 2025, the data showed.
Despite the revival in FPI inflows, the performance of the Indian stock market remained subdued. The Sensex declined over 1% during the month, while the Nifty 50 slipped 0.5%, reflecting persistent volatility and cautious investor sentiment.
Earnings Recovery Driving Flows
Market experts attribute the renewed FPI interest to improving corporate earnings momentum.
“The Q3FY26 results indicate a clear pick up in corporate earnings with a 14.7% earnings growth. This trend is likely to continue in the rest of FY26, too. As per the early estimates, FY27 earnings growth is likely to be around 15 %. This will make Indian valuations fair and attractive for FPIs to turn buyers in India,” said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
Global Risks and Sectoral Divergence
Investor sentiment, however, remained fragile amid escalating geopolitical tensions between the United States and Iran, which unsettled global markets and prompted cautious positioning. Additionally, recent artificial intelligence-related developments from Anthropic triggered a sharp selloff in domestic IT stocks, as investors reassessed competitive dynamics and near-term earnings visibility in the technology sector.
“The conflict in the Middle East has triggered a risk on situation in financial markets. It remains to be seen how the conflict will evolve and impact crude and currency markets. FIIs are likely to wait and watch how things evolve before making further commitments in emerging markets,” said Vijayakumar.
Sectoral flows reflected significant divergence during the month. FPIs were heavy sellers in IT stocks, offloading shares worth ₹10,956 crore in the first half of February alone. In contrast, they were net buyers in financial services and capital goods stocks.
“Market sentiment remained fragile throughout the week as investors reacted to rising global uncertainties, including ongoing conflict developments in the region, unresolved US–Iran discussions, and renewed tariff-related rhetoric from the United States. Persistent selling in IT stocks, amid concerns over artificial intelligence-led disruption, further dragged the benchmarks lower,” said Ajit Mishra – SVP, Research, Religare Broking.
Market Strategy: Caution Warranted
Looking ahead, the Indian stock market is expected to remain volatile amid escalating tensions in the Middle East, particularly with the intensifying confrontation between the US and Iran and Israel’s attack on Iran.
“Given persistent geopolitical risks and sector-specific volatility, a cautious and selective investment approach is advisable. Participants should focus on fundamentally strong large-cap companies and sectors with relatively stable earnings visibility such as banking, healthcare, metals, pharma, and energy,” Mishra said.
Exposure to export-oriented IT stocks may remain volatile in the near term amid ongoing concerns about technological disruption and global demand uncertainty. Realty and FMCG sectors may also continue to trade lacklustre, he added.
Mishra advises traders to maintain disciplined risk management, avoid aggressive leverage, and wait for clearer signs of stability before increasing exposure.
According to Vijaykumar, the improving India’s GDP growth and bright prospects for corporate earnings in India in FY27 augurs well for FII flows.
“Largecaps valuations are fair warranting investment. The AI triggered disruptions in the IT industry have created loss of confidence in IT stocks resulting in big selling in this segment. Money is moving towards financials, capital goods and automobiles,” said Vijaykumar.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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