Global funds made a powerful turnaround in the Indian stock market. Between July 5 and 9, foreign portfolio investors poured $1.3 billion into local securities. This is the largest weekly capital inflow since June 2025.
This dynamic marks a trend reversal. From January to May 2026, foreign players were actively withdrawing funds from India, with total outflows amounting to about $21 billion. However, the situation has now changed dramatically. On Friday, July 10 alone, foreigners purchased $272 million worth of shares on the domestic market.
The return of capital was not spontaneous. A key role was played by measures from the Reserve Bank of India (RBI). The regulator opened dollar/rupee forward contracts for new FCNR (B) deposits, making them more attractive to non-residents. Additionally, a law came into effect on April 1, 2026, abolishing the capital gains tax for foreign portfolio investors on the sale of government bonds and income derived from them.
Expert Opinion: Growth Potential Remains
Against this backdrop, Goldman Sachs analysts have revised their outlook on the Indian market upward. They note that global funds still hold a significant "underweight" position in Indian equities in their portfolios. Despite ongoing concerns about slowing profit growth and less favorable valuations compared to other markets, growing certainty about the domestic economic recovery could prompt participants to engage in active buying.
According to Goldman Sachs estimates, the Nifty 50 index could reach the 26,500-point mark by June 2027. This is roughly 10% above current levels. Notably, in June alone, India's banking sector saw a net inflow of $357 million, completely offsetting sales from previous months.
My analysis: The return of foreign capital to India is not just a local spike but part of a global liquidity shift into emerging markets. The key driver here is the stabilization of the rupee exchange rate and clear fiscal signals from the authorities. However, investors should remember: the Indian market remains sensitive to tightening monetary policy by the U.S. Federal Reserve. Any acceleration in tightening could trigger a new wave of outflows.