- FPIs reversed three months of heavy selling, injecting ₹19,675 cr in the first half of February.
- Underlying catalysts: softer US inflation, US‑India trade pact, and a fiscally supportive 2026 Union Budget.
- IT sector took a hit – an 8.2% weekly slump – highlighting selective rotation risks.
- Historical patterns suggest a 4‑to‑6‑month rally after similar inflow spikes.
- Strategic positioning now can capture upside while hedging against sector‑specific volatility.
You missed the FPI reversal that could reshape Indian equities.
India Stocks to Rebound in 2026
Why Foreign Portfolio Investors' February Inflow Matters for the Market
Foreign Portfolio Investors (FPIs) have long been the pulse of India’s equity market. After withdrawing a net ₹1.66 lakh cr in 2025, they swung back with a ₹19,675 cr purchase in the first two weeks of February. The timing aligns with two macro‑level easings: a softer U.S. inflation report that cooled expectations of aggressive Fed hikes, and the newly‑signed U.S.–India trade agreement that promises tariff relief for key Indian export lines. Both factors lowered the perceived risk premium on emerging‑market assets, nudging FPIs to re‑enter.
Sector Ripple Effects: IT Stocks, the Anthropic Shock, and Selective Rotation
The headline inflow masks an undercurrent of sectoral churn. While FPIs were net buyers on seven of eleven sessions, the IT index fell 8.2% over the week ending Feb 13, a move analysts label the “Anthropic shock.” This term captures the rapid reallocation away from high‑valuation tech names toward defensive or value‑oriented stocks as investors digest earnings volatility and global AI‑related sentiment swings. The cash‑market sell‑off of ₹7,395 cr on Feb 13 underscores that FPI enthusiasm is not uniformly distributed.
For large‑cap conglomerates such as Tata Consultancy Services and Adani Power, the IT dip creates a relative valuation gap. Historically, when IT underperforms, these diversified groups attract a proportionate share of foreign capital, boosting their price‑to‑earnings multiples. Monitoring the intra‑day flow data on these peers can give an early edge to contrarian players.
Historical Perspective: Past FPI Outflows and Subsequent Market Recoveries
India’s equity market has weathered three major FPI‑driven sell‑offs in the last decade: 2013’s “taper tantrum,” the 2018 currency shock, and the 2022 post‑Covid pull‑back. In each case, a net outflow exceeding ₹10 000 cr was followed by a 4‑6‑month rally once macro concerns abated. The pattern hinges on two dynamics:
- Liquidity Re‑injection: Global investors chase higher yields as U.S. yields stabilize.
- Policy Support: Domestic fiscal stimulus (e.g., the 2026 Union Budget) and stable inflation reinforce confidence.
Applying that framework, the current February inflow could foreshadow a mid‑year rally, especially if the U.S. inflation trajectory stays benign and the trade deal translates into tangible export growth.
Technical Signals: What Charts Reveal About the Nifty and Sector Rotation
On the technical front, the Nifty’s 336‑point drop on Feb 13 tested the 50‑day moving average (MA) at 18,600 points. The index rebounded to close above the 200‑day MA, a classic bullish signal indicating long‑term strength despite short‑term volatility. Simultaneously, the Relative Strength Index (RSI) for the IT sector slid below 30, flagging oversold conditions that could trigger a rebound if foreign capital re‑enters the space.
Investor Playbook: Bull and Bear Cases Going Forward
Bull Case: Continued softening of U.S. inflation, successful implementation of the US‑India trade pact, and a fiscal stimulus‑heavy 2026 budget sustain FPI appetite. Expect a gradual shift from cash‑market selling to phased buying in high‑growth sectors like renewable energy and consumer durables, pushing the Nifty toward 22,500 by year‑end.
Bear Case: A resurgence of global trade tensions, renewed U.S. rate‑hike rhetoric, or a sharp correction in IT valuations could reignite capital outflows. A repeat of the February 13 sell‑off magnitude (≈₹7 000 cr) would pressure the Nifty below the 18,000‑point support, prompting investors to rotate into safe‑haven assets.
Strategic positioning today means maintaining a core exposure to large‑cap diversified equities while keeping a flexible allocation to sector‑specific ETFs that can capture a potential IT rebound or a defensive tilt toward utilities and infrastructure.