We examine the flows induced by horizontally modulated, vertically confined (or guided), internal wavepackets in a stratified, Boussinesq fluid. The wavepacket induces both an Eulerian flow and a Stokes drift, which together determine the Lagrangian transport of passive tracers. We derive equations describing the wave-induced flows in arbitrary stable stratification and consider four special cases: a two-layer fluid, symmetric and asymmetric piecewise constant (‘top-hat’) stratification and, more representative of the ocean, exponential stratification. In a two-layer fluid, the Stokes drift is positive everywhere with the peak value at the interface, whereas the Eulerian flow is negative and uniform with depth for long groups. Combined, the net depth-integrated Lagrangian transport is zero. If one layer is shallower than the other, the wave-averaged interface displaces into that layer making the Eulerian flow in that layer more negative and the Eulerian flow in the opposite layer more positive so that the depth-integrated Eulerian transports are offset by the same amount in each layer. By contrast, in continuous stratification the depth-integrated transport due to the Stokes drift and Eulerian flow are each zero, but the Eulerian flow is singular if the horizontal phase speed of the induced flow equals the group velocity of the wavepacket, giving rise to a single resonance in uniform stratification (McIntyre, J. Fluid Mech., vol. 60, 1973, pp. 801–811). In top-hat stratification, this single resonance disappears, being replaced by multiple resonances occurring when the horizontal group velocity of the wavepacket matches the horizontal phase speed of higher-order modes. Furthermore, if the stratification is not vertically symmetric, then the Eulerian induced flow varies as the inverse squared horizontal wavenumber for shallow waves, the same as for the asymmetric two-layer case. This ‘infrared catastrophe’ also occurs in the case of exponential stratification suggesting significant backward near-surface transport by the Eulerian induced flow for modulated oceanic internal modes. Numerical simulations are performed confirming these theoretical predictions.