Foreign institutional investors (FIIs) have staged a notable return to the Indian equity market in February 2026, marking a decisive shift in sentiment after a volatile start to the year. Following a massive outflow of **₹35,962 crore** in January, foreign portfolio investors (FPIs) pumped in **₹33,487 crore** during the first half of February alone. This influx represents the strongest fortnightly buying recorded since April 2025. The reversal is largely attributed to a robust Q3 corporate earnings season and a stabilizing macroeconomic environment, which has bolstered the Nifty 50 toward the **25,570** level and kept the Sensex trading near the **82,800** mark. A sharp rotation is visible as foreign capital pivots away from the technology sector and toward the real economy. Capital goods emerged as the primary beneficiary, attracting **₹8,032 crore** in the first fifteen days of the month. This surge was further supported by the government’s **₹4,470 crore** stake sale in BHEL and a positive outlook on the domestic capex cycle. Financial services have also seen a significant turnaround. After enduring selling pressure of **₹8,592 crore** in January, the sector recorded fresh inflows of **₹6,175 crore** in early February. Strong balance sheets and steady credit growth in the banking pack have revived institutional interest despite elevated valuation concerns. In contrast, the Information Technology sector remains under heavy pressure. Global investors offloaded more than **₹10,000 crore** in IT stocks during the same period, driven by fears of AI-led disruption to traditional outsourcing models. The Nifty IT index has underperformed significantly, falling nearly **15%** year-to-date. Domestic Institutional Investors (DIIs) continue to provide a vital cushion to market volatility. In January, DIIs purchased a staggering **₹69,220 crore**, and they maintained this momentum with approximately **₹9,776 crore** in February. This domestic liquidity, fueled by consistent retail SIP flows, has ensured that market corrections remain shallow. Economic indicators remain supportive of the long-term India narrative. The HSBC India Composite PMI rose to **59.3** in February, the highest level since last November, signaling accelerated growth in manufacturing and services. Additionally, retail inflation is projected to remain stable at around **2.0% to 2.1%** for the fiscal year. Market analysts anticipate this trend of selective FPI buying to persist through FY26. While global risks such as US-Iran tensions and fluctuating crude prices remain, the focus has shifted toward an earnings-led market. As corporate performance shows clearer signs of recovery, India continues to be a preferred destination for patient, long-term global capital.