Foreign Portfolio Investors (FPIs) have made a decisive return to Indian equities, marking a sharp reversal from three consecutive months of heavy selling. In the first week of February 2026, foreign funds infused a net **₹8,129 crore** into the cash market. This turnaround follows a massive exit in January 2026, where FPIs withdrew **₹35,962 crore**. The primary catalyst for this shift is the landmark trade agreement between the United States and India. Under the new framework, the US has reduced tariffs on Indian imports from levels as high as **50%** down to **18%**. In exchange, India has committed to purchasing over **$500 billion** in US energy and technology products over the next five years. Market sentiment is further bolstered by the Union Budget for FY26, which emphasizes fiscal discipline and a record capital expenditure plan. Although the government increased the Securities Transaction Tax (STT) on futures to **0.05%** and options to **0.15%**, the long-term focus on infrastructure and semiconductors has maintained investor interest. Domestic economic indicators remain a pillar of stability. The Reserve Bank of India (RBI) has kept the repo rate unchanged at **5.25%**, maintaining a neutral stance. Real GDP growth for the current fiscal year is projected at **7.4%**, positioning India as one of the fastest-growing large economies globally. Currency dynamics have played a critical role in attracting capital. The Indian rupee has shown resilience, recovering from a low of **90.30** against the US dollar to stabilize around the **90.70** level. Analysts anticipate the currency could appreciate below **90.00** by March, which would further enhance returns for foreign participants. Sectoral activity reveals a clear preference for export-oriented industries and financials. Banking and large-cap stocks are seeing the highest institutional interest. Meanwhile, sectors like textiles, chemicals, and auto ancillaries are gaining traction as they become more price-competitive in the US market due to the new trade terms. While the immediate outlook is positive, global macro concerns persist. Investors are closely monitoring US debt refinancing risks and fluctuations in global crude prices. Despite these headwinds, the combination of domestic growth and improved trade relations has effectively tilted the balance toward fresh foreign inflows.