Global investors have once again turned their attention to the Indian stock market. During the trading week from July 5 to 9, foreign funds purchased local securities worth $1.3 billion. This is the largest weekly capital inflow since June 2025.
After a prolonged period of outflow, when from January to May 2026 foreign investors withdrew approximately $21 billion from Indian stocks, the dynamics have changed dramatically. On Friday, July 10 alone, the volume of purchases in the domestic market amounted to $272 million. The preceding two weeks also saw significant inflows: about $1.5 billion was directed into banking and financial sector stocks.
The key catalyst for the turnaround was the 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, from April 1, 2026, a law came into effect abolishing the capital gains tax for foreign portfolio investors on the sale of government bonds and income received from them.
Goldman Sachs analysts see significant potential for further growth. According to their estimates, the current share of foreign investment in Indian assets remains low, leaving room for increasing positions. The stability of the rupee and clearer yield forecasts only enhance the market's attractiveness.
According to the bank's report, global funds still have a "large reserve for returning to Indian stocks" due to a significant underweight in their portfolios. Despite concerns about the ongoing period of downward earnings forecast revisions, the growing certainty of a domestic recovery could serve as an incentive for proactively pricing in the upcoming upswing.
My analysis: This inflow is not just a short-term spike, but a signal of a paradigm shift. India is benefiting from a global flow of capital from overheated markets to regions with clear reforms and a stable macro environment. Goldman Sachs' expectations for the Nifty 50 index at 26,500 points by June 2027 (a 10% rise from current levels) look quite realistic, given the current support measures.