After a prolonged period of capital outflows lasting from January to May 2026, during which foreign investors withdrew approximately $21 billion from Indian equities, the market is showing a sharp reversal. From July 5 to 9, global funds purchased $1.3 billion worth of Indian securities, marking the largest weekly inflow since June 2025. On Friday, July 10, the momentum intensified, with foreigners investing $272 million in a single day.
This trend shift is no coincidence and coincided with a series of strategic measures 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, tax relief came into effect on April 1, 2026: the abolition of capital gains tax for foreign portfolio investors on the sale of government bonds.
Goldman Sachs Position: Room for Growth Remains
Analysts at Goldman Sachs see the current situation as merely the beginning of a large-scale return of capital. According to their assessment, the share of foreign investments in Indian assets is still low relative to historical levels, meaning there is significant potential for increasing positions. The stability of the rupee and clearer yield forecasts only enhance the market's appeal.
"Global funds still have a large reserve for returning to Indian equities due to significant underweighting in their portfolios. Despite concerns about downward earnings forecasts, growing certainty about the domestic recovery could serve as a catalyst for preemptively pricing in the upcoming upturn," the bank's report notes.
Nifty 50 Forecast and Sectoral Shifts
Specific figures confirm the optimism: Goldman Sachs expects the Nifty 50 index to reach 26,500 points by June 2027, approximately 10% above current levels. Foreign investors are particularly interested in the banking sector and financial companies—over the two weeks leading up to June 30, about $1.5 billion was invested in these securities. According to the National Securities Depository, net inflows into the banking sector in June totaled $357 million, fully offsetting sales from previous months.
Expert Commentary: The capital reversal into Indian equities is not a short-term spike but the beginning of a new cycle. The combination of tax incentives, currency swaps, and a stable macroeconomic environment creates a foundation for sustainable growth. For investors seeking diversification beyond overheated US and European markets, India now looks like one of the most promising destinations. However, it is worth closely monitoring corporate earnings dynamics—this will be the key driver over the next 12–18 months.