Global funds have record increased investments in Indian stocks: $1.3 billion in a week

Global capital is returning to the Indian market with renewed vigor. In the week from July 5 to 9, foreign funds purchased local stocks worth $1.3 billion. This is the largest weekly inflow since June 2025, signaling a dramatic shift in sentiment among global investors.

In just one day, July 10, foreign players spent $272 million on purchasing securities in the domestic market. Significantly, this was preceded by a massive outflow: from January to May 2026, non-residents withdrew approximately $21 billion from Indian stocks. However, the dynamics have now reversed 180 degrees.

What catalyzed the reversal?

The key trigger was the decisive measures taken by the Reserve Bank of India (RBI). The regulator opened dollar-rupee currency swaps for new FCNR (B) deposits, making them more attractive to foreigners. Concurrently, starting April 1, 2026, authorities abolished the capital gains tax for foreign portfolio investors on the sale of government bonds and the income derived from them.

These steps have already borne fruit. According to the National Securities Depository, India's banking sector recorded a net inflow of $357 million in June, completely offsetting the sales of previous months. And in the two weeks leading up to June 30, foreigners invested about $1.5 billion in shares of local banks and financial companies.

Forecasts and growth potential

Analysts at Goldman Sachs expect demand to persist. According to their assessment, the current share of foreign investments in Indian assets is still small, leaving significant room for increasing positions. The stability of the rupee and improved yield forecasts only reinforce this trend.

According to the bank's forecast, the Nifty 50 index could reach 26,500 points by June 2027, which is approximately 10% higher than current levels. At the same time, global funds retain a large reserve for a return — due to a significant underweight of Indian securities in their portfolios.

My comment: The reversal of flows into India is not just a reaction to local tax breaks. It is a signal of a reassessment of risks in emerging markets as a whole. Against the backdrop of uncertainty in China and the search for diversification alternatives, India, with its demographic dividend and reforms, is becoming one of the main beneficiaries of the global capital shift. The current inflow is only the beginning of a larger cycle.