After months of exodus, foreign investors are turning back to the Indian stock market. Between July 5 and 9, global funds poured $1.3 billion into local equities, marking the largest weekly inflow since June of this year. This reversal signals a shift in sentiment amid a series of measures taken by the regulator and the government.
Throughout 2026, international investors actively withdrew capital from India. From January to May, equity outflows totaled approximately $21 billion. However, the dynamics have changed dramatically. On Friday, July 10 alone, foreigners purchased $272 million worth of Indian securities on the domestic market. Notably, as early as two weeks prior, by June 30, they had invested around $1.5 billion in banking and financial sector stocks.
Why is capital returning?
The key catalyst has been the actions of the Reserve Bank of India (RBI). The regulator opened dollar-rupee forward swaps for new FCNR (B) deposits, making them more attractive to non-residents. Concurrently, from April 1, 2026, tax relief came into effect: the capital gains tax for foreign portfolio investors was abolished on asset sales or income from government bonds.
According to the National Securities Depository, inflows into the banking sector in June fully offset previous sales, resulting in a net inflow of $357 million.
Forecasts and potential
Goldman Sachs sees significant potential for further growth. The bank's analysts note that the share of foreign investments in Indian assets remains small, meaning there is room to increase positions, especially amid rupee stability and clearer yield forecasts.
"Global funds still have a large reserve for returning to Indian equities due to a significant underweight in their portfolios. Despite concerns about downward earnings forecast revisions, growing certainty about domestic recovery could serve as an incentive to preemptively price in the upcoming upturn," the bank's report emphasizes.
Analysts expect the Nifty 50 index to reach 26,500 points by June 2027, approximately 10% above current levels.
Expert opinion: The return of foreign capital to India is not just a short-term spike but a signal of risk reassessment. The combination of fiscal incentives, currency stability, and clear signals from the regulator creates a foundation for sustained inflows. For crypto investors, this is also an important indicator: if traditional markets in Asia show risk appetite, it could indirectly support digital assets in the region.