FIIs record strongest monthly inflows into Indian markets since Sept 2024

Foreign institutional investors (FIIs) registered their largest monthly inflows into Indian equities in 17 months in February, signalling renewed interest in the market after a prolonged period of outflows.

According to exchange data released on Thursday, overseas investors recorded net inflows of approximately $2.44bn during the month. Of this, around $2.14bn was invested in secondary markets, while nearly $299m flowed into primary issuances. It marks the strongest monthly net purchase since September 2024 although the pressures have not entirely gone away.

Primary market participation by FIIs has remained relatively steady since October 2023. However, between January 2024 and December 2025, cumulative net outflows from the secondary market exceeded $46bn, underlining the scale of earlier selling pressure.

The February rebound came despite heavy divestment in technology stocks earlier in the month, with foreign investors offloading roughly $1.21bn worth of IT shares.

Market analysts cautioned that the latest inflows remain modest compared with the magnitude of previous withdrawals and may reflect a temporary pause rather than a decisive shift in trend. Some warned that continued weakness in the IT sector could prompt renewed outflows. Others argued that the case for aggressive selling has weakened as equity valuations in India have moderated in recent months.

Indian benchmark indices have posted moderate gains over the past month. The BSE Sensex rose 1.08 per cent, while the Nifty 50 advanced 2.05 per cent. Broader markets outperformed, with the Nifty Midcap 100 climbing 4.72 per cent and the Nifty Smallcap 250 gaining 5.10 per cent.

Separate research published recently suggested early indications of a broader market recovery, projecting the Nifty could reach 27,958 over the next 12 months under a base-case scenario.

Analysts said India’s economic outlook is entering a pivotal stage, supported by greater policy clarity, progress on trade agreements and continued infrastructure investment. They highlighted developments such as the proposed India–EU Free Trade Agreement as a potential catalyst for the next phase of expansion.

Sector-wise, banks and diversified financial companies are expected to benefit from a normalisation in credit growth towards 13–14 per cent and stable asset quality trends. Meanwhile, capital goods and engineering firms are seen as well positioned to capitalise on sustained infrastructure spending and increased defence investment.

While the February inflows offer a measure of optimism, market participants remain watchful for signs that foreign investor confidence is returning on a more durable basis.

With IANS inputs