The Indian stock market has experienced a positive trend in February, with the Nifty 50 index rising by 0.6% thus far, supported by the Union Budget 2026 and a US-India trade agreement. Nevertheless, foreign institutional investors (FIIs), despite being buyers for most of the days, have emerged as net sellers in the cash market on a month-to-date basis.
In light of the India-US trade agreement, which boosted market sentiment, FIIs were net buyers on seven out of the eleven trading days till February 13, selling on only four occasions.
As of February 13th, exchange data indicates that FIis net sold equity worth ₹1,374 crore in the cash market during the ongoing month. This reflects a continuation of the pattern seen in January when they sold off ₹Rs 41,435 crore.
“The net figure has been skewed by the big sell figure of ₹7395 crore on 13th, when the Nifty 50 fell by 336 points, and the week witnessed massive selling in IT stocks reeling under the Anthropic shock. It is possible that the FIIs sold IT stocks heavily in the cash market when the IT index crashed by 8.2% during the week ended February 13th,” Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investment Ltd, said.
What could shape FII flows going ahead?
Abhinav Tiwari, Research Analyst at Bonanza, explained that global rate dynamics remain the most critical variable for FII flows as any softening in US inflation prints could reopen the risk-on window for emerging markets, including India.
Further, Tiwari believes that closer to home, a stabilizing rupee and calmer crude oil prices are reducing hedging costs, quietly improving the case for foreign re-entry into Indian cyclicals.
Perhaps most reassuringly, the Bonanza analyst said that domestic institutional investors (DIIs) have stepped up decisively, cushioning volatility and ensuring corrections remain shallow even as foreign caution persists. The broader story, however, is one of transition, believes Tiwari.
In January, domestic institutional investors purchased ₹69,220.74 crore, and they maintained their buying momentum with ₹9,775.95 crore in February, according to exchange data.
Will the FII trend change?
Mohit Gulati, CIO and Managing Partner of ITI Growth Opportunities Fund, believes that global markets have temporarily lost their mojo, which is perfectly fine.
“We are in a necessary cool-off phase. Once the dust settles, earnings growth driven by real, non-AI-disrupted sectors will reignite flows into EMs like India. Lulls like these do one important job well: they flush out impatient capital and hand the baton to patient investors, and patient capital is always rewarded,” explained Mohit.
Further talking about the STT hike, Gulati believes that it has done its part too, meaningfully curbing speculative FII churn in F&O, which explains the subdued volumes.
“But the structural India story? Intact,” added Mohit.
Similarly, Vijayakumar of Geojit Investment, too, said that given the improving prospects for corporate earnings in FY27, the market valuations, particularly for large caps, are fair.
“Therefore, once the dust over the IT sector settles down, FIIs are likely to turn buyers, going forward. If the unwinding of the AI trade in the US during the last few days gets extended, it will be a trigger for FIIs to turn buyers in India, which is a non-AI market,” opined Vijayakumar.
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