Weekly Musings – FPI flows for week ended February 06, 2026

7 Feb 2026 , 10:06 PM

Summary 

FPI flows showed early signs of improvement in the first week of February 2026, with net equity inflows after a prolonged period of selling. While higher STT on derivatives and concerns around tax certainty remain key overhangs, fiscal discipline, stable monetary policy, and the Indo-US trade deal provided some support to sentiment. However, one week of buying is not enough to signal a clear trend reversal. FPIs are likely to remain cautious and will closely track earnings, valuations, and macro stability before turning decisively positive.

FPI SENTIMENTS TURN AROUND AFTER INDO-US TRADE DEAL

There was some relief on the FPI front after a long spell of selling. After being net sellers of $3.95 billion in January 2026, FPIs turned net buyers in the first week of February, investing about $897 million. Interestingly, the market saw two very different trends during the week. On budget day (last Sunday), markets witnessed heavy selling, while a sharp rally followed later in the week after news of the Indo-US trade deal.

Let us first look at why markets corrected after the Union Budget. The key trigger was the increase in Securities Transaction Tax (STT) on derivatives. STT on futures was raised from 0.02% to 0.05% of the notional value, which translates into a 150% increase in cost on futures selling. STT on options was also increased from 0.10% to 0.15%. In addition, higher gross market borrowings of ₹17.2 trillion added to concerns. These factors dampened sentiment and led FPIs to begin the week as sellers.

The mood changed after the announcement of the Indo-US trade deal, even though detailed terms were not shared. India has broadly committed to importing US goods worth $500 billion over the next five years. More importantly, the US agreed to reduce tariffs related to Russian crude imports. The earlier effective tariff of 50% was brought down to 18%, which significantly boosted market sentiment. This positive development triggered a strong market rally and encouraged FPIs to return as buyers.

ROOF OF THE PUDDING – FPI FLOWS FOR FEB’26

The table captures monthly FPI flows into equity and debt for last 5 calendar years.

Calendar Month	FPI Flows Secondary	FPI Flows Primary	FPI Flows Equity	FPI Flows Debt/Hybrid	Overall FPI Flows
Calendar 2022 (₹ Crore)	(146,048.38)	24,608.94	(121,439.44)	(11,375.78)	(132,815.22)
Calendar 2023 (₹ Crore)	1,27,759.75	43,347.14	1,71,106.89	65,954.38	2,37,061.27
Calendar 2024 (₹ Crore)	(1,21,210.21)	1,21,637.15	426.94	1,65,342.98	1,65,769.92
Calendar 2025 (₹ Crore)	(2,40,193.24)	73,909.60	(1,66,283.64)	62,234.51	(1,04,049.13)
Jan-2026 (₹ Crore)	(38,740.12)	2,778.32	(35,961.80)	6,721.54	(29,240.26)
Feb-2026 (₹ Crore) #	7,765.24	363.64	8,128.88	7,419.40	15,548.28
Total for 2026 (₹ Crore)	(30,947.88)	3,141.96	(27,832.92)	14,140.94	(13,691.98)
Data Source: NSDL (outflows in brackets) (# – Data up to February 06, 2026)

• Since there were no major IPOs during the week, most equity inflows from FPIs were limited to the secondary market. Typically, FPIs step up buying in Indian stocks after the rupee weakens sharply and then starts to recover. During the week, the rupee did strengthen from ₹92.10 per dollar to ₹90.50 per dollar.
• However, the net equity inflow of $897 million still looks modest when compared to the heavy FPI selling seen in January and in the months before that. This suggests that FPIs are still cautious and may be waiting for clearer signals on valuations and upcoming quarterly results.
• On the other hand, FPI investments in debt were quite strong. In fact, debt inflows in just the first week of February were higher than the total inflows seen in the entire month of January. Despite concerns around higher government borrowings, the government has shown fiscal discipline by targeting a fiscal deficit of 4.3% of GDP and a Debt-to-GDP ratio of 55.6% by FY27.
• In addition, the RBI has removed the earlier cap of ₹2.5 trillion on VRR investments in debt and merged it with the overall FAR limits. This move is likely to encourage more FPI investments into debt in the coming weeks. For now, it’s a case of wait and watch.

WHAT DETERMINED FPI SENTIMENTS IN THE WEEK

For the week ended February 06, 2026, FPIs invested a net $897 million in Indian markets.

The Union Budget’s decision to increase STT on futures and options could worry FPIs. Many FPIs are active in arbitrage strategies and also use options extensively for hedging. Higher STT directly increases their trading costs. In addition, FPIs were hoping for some clarity and stability on taxation, which the Budget did not provide.

1. FPIs are likely to view the government’s cautious approach to debt positively. Like credit rating agencies, FPIs prefer disciplined debt management. The Budget’s move to reduce the fiscal deficit by 10 basis points and bring down the debt-to-GDP ratio by 90 basis points in FY27 was broadly welcomed.
2. The biggest positive for the week was the signing of the Indo-US trade deal. This reduces tariffs on Indian exports to the US from 50% to 18%, among the lowest tariff levels in Asia. While India’s approach to Russian oil is still unclear, sectors such as textiles, chemicals, and gems and jewellery stand to benefit.
3. The RBI also announced its first monetary policy of the year during the week. Repo rates were kept unchanged at 5.25%, but the RBI signalled that liquidity support would be available if needed. With nominal GDP growth of 10.2% for FY27 already factored in, an immediate rate cut was not seen as necessary. The key challenge now is to lower lending rates while keeping deposit rates attractive to address the loan–deposit gap.
4. During the week, the Indian rupee strengthened sharply to around ₹90.50 per dollar, supported by positive news around the Indo-US trade deal. However, a strong dollar and rising crude oil prices remain key risks for the rupee.

Let us now look at the day-wise FPI flow numbers.

HOW SHOULD INVESTORS INTERPRET FPI FLOW TRENDS IN INDIA

Here is the last 4 rolling weeks data on FPI flows in rupee and dollar terms.

Date	FPI Flow (₹ Crore)	Cumulative flows	FPI Flow($ Million)	Cumulative flows
12-Jan-26	-3,686.99	-3,686.99	-409.03	-409.03
13-Jan-26	-3,108.35	-6,795.34	-344.65	-753.68
14-Jan-26	-429.85	-7,225.19	-47.61	-801.29
15-Jan-26	0.00	-7,225.19	0.00	-801.29
16-Jan-26	-3,515.33	-10,740.52	-389.72	-1,191.01
19-Jan-26	-4,542.94	-15,283.46	-501.16	-1,692.17
20-Jan-26	-2,062.07	-17,345.53	-226.68	-1,918.85
21-Jan-26	-1,210.45	-18,555.98	-132.96	-2,051.81
22-Jan-26	-988.70	-19,544.68	-107.99	-2,159.80
23-Jan-26	-2,264.18	-21,808.86	-247.23	-2,407.03
26-Jan-26	0.00	-21,808.86	0.00	-2,407.03
27-Jan-26	-3,213.11	-25,021.97	-350.70	-2,757.73
28-Jan-26	-4,468.52	-29,490.49	-486.64	-3,244.37
29-Jan-26	5,390.31	-24,100.18	587.85	-2,656.52
30-Jan-26	-72.29	-24,172.47	-7.86	-2,664.38
02-Feb-26	1,905.75	-22,266.72	207.38	-2,457.00
03-Feb-26	-1,117.42	-23,384.14	-121.93	-2,578.93
04-Feb-26	7,561.44	-15,822.70	835.98	-1,742.95
05-Feb-26	1,091.90	-14,730.80	120.70	-1,622.25
06-Feb-26	-1,312.79	-16,043.59	-145.23	-1,767.48
Data Source: NSDL

• One positive in the latest week was that FPIs were net buyers in equities on 3 out of 5 trading days. This is a clear change from the past month, when FPIs were sellers on most days.
• At the same time, FPIs face a contradiction. Over the last one year, India has been among the worst-performing emerging markets, even though it remains the fastest-growing large economy.
• The key concern for global investors is policy certainty, especially on taxation. FPIs want a stable and predictable tax regime, without retrospective changes. Past cases such as Cairn Energy, Vodafone, and more recently Tiger Global–Flipkart have added to these worries.

Some quick takeaways for investors: one week of FPI buying is not enough to draw strong conclusions. FPI sentiment toward India has remained cautious in recent months, and it is still unclear if that has changed. While the Indo-US trade deal may boost sentiment in the short term, FPIs will ultimately focus on hard data, earnings growth, macro fundamentals, and valuations.