Foreign investors have once again turned their attention to the Indian stock market, recording the largest weekly capital inflow since June 2025. Between July 5 and 9, foreign funds purchased local securities worth $1.3 billion, signaling a trend reversal after several months of aggressive capital outflows.
Throughout 2026, global players actively exited the Indian market, withdrawing approximately $21 billion from equities from January to May. However, by mid-July, the dynamics changed dramatically. On Friday, July 10 alone, foreigners spent $272 million on purchasing shares in the domestic market. Notably, just two weeks prior, as of June 30, inflows into India's banking and financial sector amounted to around $1.5 billion.
Data from the National Securities Depository confirms the turnaround: net inflows into the banking sector reached $357 million in June, completely offsetting sales from previous months. The key catalyst was 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 non-residents. Additionally, starting April 1, 2026, authorities abolished the capital gains tax for foreign portfolio investors on sales and income from government bonds.
Growth Potential Remains
Goldman Sachs analysts see significant room for further capital return. According to their estimates, the current share of Indian assets in global fund portfolios remains historically low, creating conditions for increasing positions. The stability of the rupee and improved forecasts for corporate earnings only strengthen this argument. Bank experts expect the Nifty 50 index to reach 26,500 points by June 2027, approximately 10% above current levels.
Cryptalist Analyst: "The return of foreigners to India is not just a temporary surge but a structural shift. The combination of fiscal stimulus, monetary policy easing, and market undervaluation creates an ideal environment for long-term capital inflows. However, investors should closely monitor the rupee's dynamics and global interest rates, which remain key risks."