MUMBAI: Foreign institutional investors (FIIs) remained net sellers of Indian equities for the eighth straight month in February 2026, offloading shares worth a net ₹6,640 crore [citation:4]. Despite a late-month surge in domestic institutional buying — DIIs purchased ₹12,293 crore on the last trading day — foreign outflows persisted, underscoring deep structural headwinds [citation:4].
February FII flow snapshot
*DIIs net bought ₹12,293 crore on Feb 27, but couldn't offset monthly FII selling [citation:4].
Eight months and counting: longest streak since 2025
FIIs have now sold Indian equities every month since July 2025 — a streak of eight consecutive months [citation:4]. The cumulative outflows since then exceed ₹1.5 lakh crore, making this one of the most prolonged sell-off episodes in a decade.
Monthly FII net flows (₹ crore)
| Month | FII net (₹ Cr) |
|---|---|
| February 2026 | -6,640 |
| January 2026 | -14,200 (est) |
| December 2025 | -11,342 |
| November 2025 | -9,876 |
| October 2025 | -21,430 |
| September 2025 | -18,500 |
Source: NSDL, NSE, Bloomberg estimates [citation:1][citation:4]
Why FIIs are selling: BoJ, US yields, and the 'SaaSpocalypse'
1. Bank of Japan's rate hike ends easy carry trade
The Bank of Japan's decision to abandon its negative interest rate regime and raise rates to 2.50% — the first hike in 17 years — has upended global liquidity [citation:4]. Japanese treasury bonds now offer attractive yields, prompting FIIs to unwind carry trades and repatriate funds. This has increased funding costs for foreign investors and reduced risk appetite for emerging markets like India [citation:4].
2. IT sector rout: ₹10,956 crore sold in February
IT stocks bore the brunt of selling amid "SaaSpocalypse" fears — concerns that generative AI agents could replace traditional coding and IT services [citation:3][citation:6]. In just the first fortnight of February, FIIs offloaded ₹10,956 crore worth of IT stocks, pushing FII holdings in the sector to a four-year low of ₹4.49 lakh crore [citation:3][citation:6].
- Infosys: -17.5%
- TCS: -15.5%
- HCLTech: -13%
- Tech Mahindra: -13%
- Nifty IT Index: -15%
Source: NDTV Profit [citation:6]
3. US Treasury yields & dollar strength
Despite a softer February, the broader trend of elevated US bond yields (10-year around 4.3%) and a resilient dollar continues to lure capital away from emerging markets. FIIs sold US$800 million on a single day in mid-February, underscoring choppy flows [citation:10].
DIIs: the cushion that prevented a deeper crash
Domestic institutional investors (mutual funds, insurers) have been the bulwark against FII selling. In February alone, DIIs net bought ₹12,293 crore in the last session and remain net buyers of ₹85,195 crore for the year so far [citation:1][citation:4]. This resilience reflects strong retail inflows through SIPs and sustained confidence in Indian growth story.
Despite heavy selling, benchmark indices ended February with modest gains (Nifty up 0.6%), thanks to relentless DII buying and positive triggers like the US-India trade deal [citation:10]. However, volatility spiked mid-month, with India VIX jumping 10% on Feb 19 [citation:7].
Expert view: when will selling pause?
Anuj Gupta (SEBI-registered expert): "Bank of Japan's decision has ended the easy cash-carry trade. FIIs face rising funding costs; this is the major reason for eight months of selling" [citation:4].
Amit Goel (PACE 360): "US economy fragility and BoJ policy will keep pressure on FII flows. Nifty could test 21,000 by end-2026" [citation:4].
VK Vijayakumar (Geojit): "Rupee appreciation from record lows and the India-US trade deal could trigger a trend shift, but it's too early to call" [citation:9].
Sectoral outflows: IT bleeds most
In 2026 so far, FIIs have sold nearly ₹12,800 crore worth of IT stocks — the highest among all sectors [citation:6]. Financials, metals, and oil & gas also witnessed selling, though on a smaller scale. DIIs have been net buyers across most sectors, particularly financials and energy.
What lies ahead: catalysts to watch
- BoJ March meeting (Mar 18–19): Any hint of further hikes could exacerbate outflows [citation:4].
- Rupee movement: Stability below 90/$ may attract FIIs back [citation:9].
- Q4 earnings: Strong corporate performance could stem selling.
- US Fed rate path: Softer US inflation has raised hopes of rate cuts, supporting EM flows [citation:10].
Key takeaways for investors
- FIIs net sold ₹6,640 crore in February — eighth straight month of outflows [citation:4].
- BoJ rate hike (2.50%) ended cheap carry trade, forcing repatriation [citation:4].
- IT sector worst hit: ₹10,956 crore sold in first fortnight; Nifty IT down 15% [citation:3][citation:6].
- DIIs continue to cushion: Net buyers of ₹12,293 crore in Feb last session, ₹85,195 crore YTD [citation:1][citation:4].
- Markets resilient: Nifty up 0.6% in Feb despite outflows, thanks to domestic flows [citation:10].
- Watch BoJ, US yields, and rupee for trend reversal signals.
Disclaimer: The analysis and views are for information only. Please consult your advisor before taking investment decisions.