The latest minutes from the Federal Reserve have once again become the biggest trigger for global markets. Investors across the world carefully read every line of the Federal Open Market Committee (FOMC) discussion to understand where interest rates may go next. If the tone suggests that rates will stay higher for longer because inflation is still a worry, stock markets usually react negatively. On the other side, even a small hint that rate cuts may come sooner can lift sentiment.
Recent reports show that inflation in the United States remains sticky, even though it has cooled from earlier highs. Because of this, the Fed has stayed cautious. Markets are now trying to guess whether policy will remain tight for a longer period than earlier expected. Any surprise in the language of the minutes could move emerging markets like India quite sharply.
Foreign Institutional Investors had been selling heavily through much of 2025. That selling created pressure on Indian indices and pushed volatility higher. However, early February 2026 data showed a strong reversal. Foreign Portfolio Investors infused about ₹19,675 crore in the first half of February after months of continuous outflows.
This sudden shift is important. When global funds return to Indian equities, benchmarks usually get strong support. But flows can change quickly if global risk appetite turns weak again. Therefore, daily FII numbers remain very important for short term direction. If buying continues at the current pace, it may help markets stabilise and even move higher. If it slows down, confidence could again get shaky.
While FIIs were selling, Domestic Institutional Investors stepped in and bought aggressively. DII holding in the Nifty50 recently touched an all-time high of 24.8 percent. This shows that Indian institutions are now playing a much bigger role in the market than before.
Because of this change, the market is not as dependent on foreign money as it was a few years ago. When overseas investors pulled money out, domestic funds absorbed part of that pressure. This structural shift gives some comfort. Still, FII flows remain a powerful driver of momentum, especially in large-cap stocks.
Corporate earnings are another key factor that will shape market direction. In recent sessions, some sectors like auto and metals showed strength, while defensives underperformed. This indicates that investors are becoming selective rather than buying everything.
If upcoming quarterly results show strong profit growth, it may attract both foreign and local investors. However, if earnings disappoint, especially in heavyweight companies, markets could face renewed pressure. The benchmark indices such as the Sensex and the Nifty 50 have already seen sharp swings based on global and corporate news. This sensitivity is likely to continue in coming weeks.
Currency movement also plays a big role in foreign investment decisions. If the rupee remains stable against the dollar, it reduces risk for overseas investors. But if the currency weakens sharply after hawkish Fed commentary, FIIs may hesitate to deploy fresh money.
Liquidity conditions in India are equally important. The Reserve Bank of India has been managing liquidity carefully, balancing inflation concerns with growth needs. A supportive policy stance can improve sentiment in equities. Any tightening move, however small, could dampen mood.
Exchange data published regularly by the National Stock Exchange also provides clarity on daily institutional flows. Traders closely watch these updates to judge whether buying is broad-based or limited to a few stocks.
The direction of Indian stocks now depends on a mix of global and domestic forces. A softer tone in Fed minutes, continued FII inflows, stable currency and healthy earnings can push markets higher. But if the Fed sounds more hawkish and foreign investors turn cautious again, downside risk may increase.
At present, the market seems balanced between hope and caution. The return of foreign money in early February has improved confidence, but sustainability of that trend is still not fully clear. The coming weeks will be critical, and volatility may remain high. Investors are watching every signal closely, because small changes in global cues can create big moves in Indian equities.