Foreign portfolio investors (FPIs) showed a strong return to Indian equities in February by investing Rs 22,615 crore, marking the highest monthly inflow in the past 17 months. This positive trend followed three consecutive months of significant selling. The fresh investments were driven by favorable factors such as the interim India-US trade deal, corrections in domestic market valuations, and robust third-quarter corporate earnings.
Data from depositories revealed that FPIs had withdrawn Rs 35,962 crore in January, Rs 22,611 crore in December, and Rs 3,765 crore in November. Despite the substantial inflow in February, foreign investors have pulled out a net Rs 1.66 trillion (about $18.9 billion) from Indian equities in 2025 so far, making it a challenging period for foreign flows in recent years.
The recent outflows were influenced by volatile currency movements, global trade tensions, concerns regarding potential US tariffs, and high equity valuations. February’s inflow stands as the highest since September 2024 when FPIs had invested Rs 57,724 crore in Indian markets. A report by Emkay Global Financial Services had earlier suggested that foreign inflows into Indian equities would rebound once currency volatility stabilized.
The report emphasized the crucial role played by domestic institutional investors (DIIs) in maintaining market stability during FPI selling phases. DIIs now hold a larger share in Indian equities compared to FPIs, acting as a cushion against market fluctuations. The long-term trend of domestic savings shifting towards equities is expected to continue, with the share of equities in household savings projected to increase over the next decade, supported by consistent domestic inflows. Despite a recent uptick in gold’s share in household savings, there has been no significant impact on incremental equity flows.
