Foreign institutional investors (FIIs) are staging a cautious comeback to the Indian equity market, marking a reversal after a heavy sell-off period in late 2025 and January 2026. In the first week of February, net inflows reached **8,129 crore** ($897 million), breaking a three-month streak of exits that saw **35,962 crore** pulled in January alone. This renewed interest is largely attributed to a historic interim trade deal between India and the United States announced on February 6. Under the agreement, the U.S. reduced reciprocal tariffs on Indian goods from **25% to 18%**, while India committed to purchasing **$500 billion** in American energy and technology products over the next five years. The Indian rupee has provided additional structural support, strengthening from record lows of **92.10** to approximately **90.53** per dollar this week. Market analysts anticipate the currency could stabilize below the **90.00** mark by the end of the quarter, potentially triggering further capital inflows as exchange rate volatility subsides. Despite the positive momentum, benchmark indices show signs of consolidation. The Nifty 50 recently hovered near the **25,950** level, while the Sensex remained steady around **84,233**. A sustained rally remains dependent on the consistency of the Q3 FY26 corporate earnings cycle, which has delivered a mixed performance across sectors. Manufacturing and consumer giants have reported robust growth, with Titan seeing a **61%** jump in net profit and Grasim advancing **26%**. Conversely, the IT sector faces headwinds; major players like TCS and Infosys recorded losses of up to **2.5%** in recent sessions due to margin pressures and cautious global spending. The hike in Securities Transaction Tax (STT) on derivatives—raising futures rates to **0.05%** and options to **0.15%**—also remains a point of friction for foreign funds. Investors are closely monitoring whether the strength in domestic demand can offset these increased trading costs and the broader global risks.