Despite heavy IT selloff, FPI inflows remain positive so far in February

EM flows gathering pace as investors double down on de-dollarisation trade

Foreign portfolio investor (FPI) flows into Indian equities are showing early signs of stabilisation after heavy selling at the start of the year. After an estimated net outflows of ₹36,000 crore (nearly $4 billion) in January, FPIs have turned net buyers of about ₹20,000 crore ($2.2 billion) so far in February, excluding Friday’s sell-off of ₹7,400 crore ($800 million) following the rout in information-technology (IT) stocks. 

The turnaround appears to be driven by a revival in India-focused funds and sustained inflows into broader emerging market (EM) strategies, where India remains a key allocation. 

According to Elara Capital, India-focused funds saw inflows of $217 million last week — the highest in seven months — entirely ETF-led, with US- and Ireland-domiciled vehicles accounting for the bulk. 

At the same time, global emerging market (GEM) equity funds attracted $6.9 billion in inflows last week, after $5 billion and $11 billion in the preceding two weeks. Elara noted that this marks the strongest GEM momentum since the 2016-18 cycle, reflecting renewed interest in the de-dollarisation trade. 

In contrast, dedicated long-only India funds have continued to see redemptions since September 2025, largely from investors based in Japan and Luxembourg. 

On an aggregate basis, India-related flows — combining country-specific and regional allocations — have improved over the past three weeks, as reflected in exchange and NSDL data. Elara estimates that most recent FPI inflows into India have come via GEM funds, with Asia excluding-Japan allocations contributing around $285 million. 

The brokerage said EM assets continue to attract capital despite volatility across commodities, reinforcing the anti-dollar theme. Commodity equity funds have seen inflows for 11 straight weeks, though the pace has moderated. 

Market participants remain cautious on sustainability. 

“We don’t expect foreign investors to return aggressively, but the intensity of selling may ease. When EMs as an asset class see inflows, India still gets some allocation — even if investors are underweight. Put together, foreign selling could moderate,” said Gautam Chhaochharia, managing director and head of global markets at UBS India. 

“A sustained rally, however, would require either stronger earnings or more attractive valuations.”

 

Ebb and flow

• Nearly $4 billion pulled out in Jan
• Around $2 billion inflows in Febso far
• Revival linked to strong EM fund inflows
• India a key allocation within EM basket
• India-focused funds seeing ETF-led flows
• Dedicated long-only India funds still facing redemption