Foreign investors are once again actively entering the Indian stock market, demonstrating record weekly inflows. From July 5 to 9, global funds invested $1.3 billion in Indian securities, marking the largest weekly capital inflow since June 2025.
This surge in activity marks a sharp reversal after a prolonged period of outflows. Earlier, during 2026, foreign investors were actively withdrawing funds from India, with net outflows totaling approximately $21 billion in the first five months of the year. Now, the dynamics have changed dramatically. On Friday, July 10 alone, foreign funds purchased $272 million worth of Indian stocks on the domestic market.
Notably, the trend of capital return emerged even before the massive weekly buying spree. In the two weeks leading up to June 30, foreign investors poured about $1.5 billion into shares of Indian banks and financial companies. According to the National Securities Depository, this allowed the country's banking sector to achieve a net inflow of $357 million in June alone, completely offsetting sales from previous months.
RBI Policy and Tax Relief as Catalysts
Key factors behind the shift in sentiment were decisive measures by the Reserve Bank of India (RBI) and fiscal changes. The regulator opened dollar/rupee forward contracts for new deposits under the FCNR (B) scheme, significantly enhancing the attractiveness of such deposits for non-residents. Additionally, starting April 1, 2026, the government abolished the capital gains tax for foreign portfolio investors on the sale or income from government bonds.
These steps have created a strong foundation for capital return. Goldman Sachs revised its outlook on the Indian market upward, noting that global funds still have significant room to increase their allocation to Indian assets. The bank's analysts emphasize that current underinvestment in Indian securities within global fund portfolios sets the stage for further inflows, especially amid rupee stability and clearer yield forecasts.
Forecasts and Prospects
According to expert estimates, the Nifty 50 index could reach 26,500 points by June 2027, approximately 10% above current levels. This points to confident medium-term upside. However, it is worth noting that investors remain cautious due to the ongoing period of declining corporate earnings forecasts. Nevertheless, growing certainty regarding India's domestic economic recovery could serve as the trigger that prompts market participants to begin pricing in the upcoming rally.
Cryptalist Commentary: The return of foreign capital is undoubtedly a positive signal for the Indian market. However, given the scale of the previous outflow, current inflows still appear more like a "trial balloon" than a sustainable trend. The key driver for further growth will be not so much capital inflow per se, but rather the ability of the Indian economy to confirm high growth rates and a recovery in corporate profits. If forecasts materialize, the current moment could go down in history as a turning point.