FIIs turn net buyers in February with biggest monthly inflows in 17 months

FII

• FIIs recorded $2.44B net inflows in Indian stocks in February
• This marks the highest monthly inflow since September 2024
• Experts say inflows may signal pause, not a structural reversal

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After months of sustained selling, foreign institutional investors (FII) turned net buyers in Indian equities in February, logging their largest monthly inflows in 17 months despite continued volatility in domestic markets.

FIIs have so far bought nearly $2.14 billion in secondary markets and $299 million in primary markets, taking total net inflows to about $2.44 billion. This is the highest monthly inflow since September 2024, when investments had reached nearly $5.95 billion.

The buying comes even as FIIs sold over $1.21 billion worth of IT stocks in the first half of February amid AI concerns, according to NSDL data. So far this month, Sensex and Nifty remained flat while BSE MidCap150 Index and SmallCap 250 Index gained 2 percent and 1.4 percent respectively.

Primary markets have seen steady FII buying since October 2023. In secondary markets, however, the latest inflow marks the first net buying since July 2025. Though FIIs briefly turned marginal buyers in October 2025, they remained net sellers for most of the following six months. Between July 2025 and January 2026, cumulative secondary market outflows stood at around $20 billion, while primary markets drew $6.41 billion.

Market participants remain divided on whether the February inflows signal a durable shift. Siddharth Bhamre, Head of Research at Asit C. Mehta Investment Intermediates, said the current buying is small compared to the scale of recent selling and indicates a pause rather than a structural reversal.

Bhamre noted that in calendar year 2025, Indian markets were among the worst-performing globally, even as other markets delivered stronger returns and the rupee depreciated sharply. As a result, Indian equities are now relatively lower compared to other global options. With other markets having performed well and India underperforming, the case for fresh aggressive selling appears less compelling, he said. However, he added that selling in IT may continue and warned that rising delinquencies in the financial space could trigger renewed outflows if NPA levels increase sharply.

The reversal follows a prolonged period of heavy selling. Between January 2024 and December 2025, FIIs offloaded roughly $46.1 billion worth of equities in secondary markets, leaving foreign portfolios significantly underweight on India.

Ajay Bodke, Independent Research Analyst, said the early signs of positive flows reflect a reassessment after nearly two years of underperformance compared to emerging markets such as China, South Korea, Japan and Taiwan. He said several foreign broking houses had turned bearish on India during this phase, contributing huge selloff and underweight positioning.

Bodke said capital reallocation over the past two years was driven by valuation and thematic shifts. When China’s valuations fell to seven to eight times PE, FIIs shifted funds from India to China. As the AI rally gathered pace, hardware-focused economies such as Taiwan and South Korea attracted higher allocations, while India faced slowing earnings growth and elevated valuations, resulting in further outflows.

"Positioning remains a key driver for the next 12-18 months. With foreign portfolios underweight, early signs of earnings stabilisation could prompt investors to build positions three to six months ahead of a recovery. Valuations have moderated following a time correction in large caps and sharper declines in mid and small caps. At the same time, concerns around high valuations are emerging in Taiwan and South Korea, leading to gradual rotation towards relatively less expensive markets", Bodke added.

India was also viewed as an anti-AI play during the AI-led rally dominated by America, China, South Korea and Taiwan, leading to sharp corrections in IT services stocks. A mix of valuation resets and positioning shifts has prompted FIIs to recalibrate their stance in recent weeks. Bodke said that over an 18 to 24 month horizon, India could outperform its emerging market peers, with FII inflows strengthening further. He added that trade uncertainties have eased, with India signing a free trade agreement with the European Union and already having agreements with the United Kingdom and Australia. Talks with Canada have also resumed.