Global funds have made a powerful turnaround in their stance on the Indian stock market. During the trading week from July 5 to 9, foreign investors poured $1.3 billion into local securities — the largest weekly inflow since June 2025. This surge in activity marks a dramatic shift in trend after months of capital outflows.
A 180-Degree Turn
To recall, from January to May 2026, non-residents withdrew about $21 billion from Indian equities. However, the dynamics have now changed. On Friday, July 10 alone, foreign funds purchased $272 million worth of securities on the domestic market. Notably, two weeks prior, by June 30, they had already invested around $1.5 billion in banking and financial sector stocks. According to the National Securities Depository, net inflows into the banking sector in June amounted to $357 million, completely offsetting sales from previous months.
Drivers of the Return: RBI Policy and Tax Relief
The key catalyst for this turnaround has been the measures taken by the Reserve Bank of India (RBI). The regulator opened dollar/rupee forward contracts for new FCNR (B) deposits, making them more attractive to foreign depositors. Additionally, starting April 1, 2026, authorities abolished the capital gains tax for foreign portfolio investors, which was levied on the sale of government bonds or income derived from them. These steps have significantly reduced regulatory barriers and enhanced the appeal of Indian assets.
Forecasts and Potential
Analysts at Goldman Sachs see significant potential for further growth. According to their assessment, the current share of foreign investments in Indian assets is still small, leaving room for expansion. Against the backdrop of rupee stability and clearer yield forecasts, demand from funds is likely to persist. Moreover, the bank has revised its forecast for the Nifty 50 index upward, expecting it to rise to 26,500 points by June 2027 — roughly 10% above current levels.
Cryptalist Commentary: The reversal of foreign capital into India is not just a one-time correction but a structural signal. India is now becoming one of the key beneficiaries of the global capital shift from developed to emerging markets, especially amid China's economic slowdown and uncertainty in the U.S. For crypto investors, this is another reminder: keep an eye on macroeconomic trends in Asia — they will increasingly set the tone across all financial markets, including digital assets.