India's stock market is experiencing a sharp reversal in sentiment. After months of capital outflows, foreign investors have made the strongest injection of funds in the last year and a half. During the trading week from July 5 to July 9, global funds purchased $1.3 billion worth of Indian stocks. This is the largest weekly inflow since June 2025.
The surge in activity on Friday, July 10, is particularly telling: in just one day, non-residents bought $272 million worth of local securities. This data confirms that the "exit India" strategy, which dominated from January to May (when about $21 billion was withdrawn from the market), has completely exhausted itself.
Why is capital returning?
The key catalyst is the actions of the Reserve Bank of India (RBI). The regulator opened dollar/rupee currency swaps for new FCNR (B) deposits, making them attractive to foreigners. Additionally, from April 1, 2026, tax relief came into effect: the capital gains tax for portfolio investors on the sale of government securities has been abolished.
Against this backdrop, Goldman Sachs has revised its forecast for the Nifty 50 index upward, to 26,500 points by June 2027, which is approximately 10% above current levels. The bank's analysts emphasize that global funds still have a significant "underweight" position in Indian assets in their portfolios, meaning the potential for further inflows is enormous.
An additional driver has been the inflow into the banking sector: in June, foreigners invested a net $357 million in shares of Indian banks and financial companies, fully compensating for previous sell-offs.
Cryptalist's comment: The flow reversal into India is a classic example of how a combination of monetary stimulus and tax reforms can radically change market sentiment. The current inflow is just the beginning. Given that the foreign share in Indian stocks is still below historical norms, we may see several more waves of buying in the coming quarters. Investors should closely monitor the rupee's dynamics: currency stability will be a key factor in retaining capital.