FIIs poured Rs 22,615 crore into Indian equities in February. Can the conflict between Iran and Israel reverse the trend?

While Foreign Institutional Investors (FIIs) turned net buyers in February and picked up Indian equities worth Rs 22,615 crore during the month, Friday’s sharp sell-off has cast doubt on the sustainability of that trend reversal. With the conflict between Iran and Israel escalating this weekend, risk appetite may take a back seat, prompting foreign investors to take a wait-and-see approach before sending new flows of money into emerging markets.The conflict in the Middle East has led to a risky situation on the financial markets. It remains to be seen how the conflict will develop and affect the crude oil and currency markets, said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, commenting on the crisis. According to him, FIIs are likely to wait and see how things develop before making further commitments in emerging markets.

Echoing a similar sentiment, Nachiketa Sawrikar, fund manager at Artha Bharat Global Multiplier Fund, said he expects broad selling of risk assets in both developed and emerging markets against the backdrop of a US-Israel attack on Iran.He said trading activity appears to be increasingly tilted towards US securities, with a parallel shift in flows into precious metals, pointing to the possibility of capital disappearing from emerging markets. “We expect the ongoing rally in US Treasuries, oil, gold and silver to continue,” the expert added.

Sawrikar also sees a deeper impact of the war on India, accelerating the outflow of foreign capital due to its dependence on imported crude oil. “Higher crude oil prices could widen the current account deficit, fuel domestic inflation and put pressure on the rupee,” he warned.

Vijayakumar said FIIs’ purchases on most days in February showed a clear shift in their investment strategy towards India. “There are variations in sectoral investments in February. FPIs had sold heavily in IT stocks due to the anthropic shock and continued weakness in this segment. But they were buyers in financial services and capital goods,” the Geojit analyst said.

While FPIs invested Rs 19,782 crores in the secondary markets, around Rs 2,832 crores were pumped into the primary market. On Friday, FII sold shares worth Rs 7,536.36 crore, triggering a massive sell-off. Benchmark indices Nifty and the BSE Sensex closed with deep cuts on Friday amid selling pressure across the board. The auto, financial and FMCG sectors remained major laggards, while the IT sector saw selective buying. In a volatile session, the broader Nifty fell 317.90 points, or 1.25%, to close at 25,178.65, while the 30-share Sensex fell 961.42 points, or 1.17%, to settle at 81,287.19.

FPI trends
An inflow was recorded in February after a sharp exodus in January of Rs 35,962 crore. FIIs are still net sellers of Rs 13,347 crore in 2026.

In 2025, FII buying trends remained patchy, but the overall trend was bearish. They withdrew Rs 1,66,286 crore from Indian markets as trade deal delays and premium valuations weighed on sentiment.

FIIs were net sellers in December, selling domestic equities worth Rs 22,611 crore.

The April-June period of 2025 witnessed inflows totaling Rs 38,673 crore. Meanwhile, massive sales to the tune of Rs 1,16,574 crore took place during the January-March quarter.