Global investors have once again turned towards the Indian stock market, recording the largest weekly capital inflow since June 2025. Between July 5 and 9, foreign funds invested $1.3 billion in Indian equities, and on Friday, July 10, added another $272 million to this volume. This is a powerful signal of a trend reversal after a prolonged period of outflows.
Let me remind you that from January to May 2026, non-residents withdrew approximately $21 billion from Indian equities. However, the dynamics have now changed dramatically. The key role in this reversal was played by measures from the Reserve Bank of India (RBI): the regulator opened dollar/rupee forward contracts for new FCNR (B) deposits, making them more attractive to foreigners, and abolished the capital gains tax for portfolio investors when selling government bonds.
These steps, combined with the stability of the rupee, have created a favorable backdrop. Analysts at Goldman Sachs believe that global funds still have significant room to increase their positions in India, given their current underweight status. According to the bank's assessment, the uncertainty surrounding the domestic recovery is beginning to dissipate, which could prompt market participants to price in a future upswing in advance. Goldman Sachs also forecasts that the Nifty 50 index will reach 26,500 points by June 2027 — approximately 10% above current levels.
Interest in the banking sector is particularly notable: in the two weeks leading up to June 30, foreigners invested about $1.5 billion in bank and financial company stocks. In June, net inflows into this sector amounted to $357 million, fully offsetting the sales of previous months.
My comment: The return of foreign capital to India is not just a one-time spike, but the beginning of a structural reversal. The combination of tax relief, currency stability, and the still-low share of global funds in Indian equities lays the foundation for a sustainable inflow. However, investors should closely monitor the dynamics of corporate profits — this will determine whether the market can confirm optimistic expectations.