Record capital inflow: foreign funds invested $1.3 billion in Indian stocks in one week
The Indian stock market is experiencing a powerful reversal. Between July 5 and 9, foreign funds purchased local stocks worth $1.3 billion. This is the largest weekly capital inflow since June 2025, signaling a dramatic shift in global investor sentiment.
In just one day, July 10, foreign players spent $272 million on purchasing securities in the domestic market. For comparison, from January to May 2026, non-residents were actively withdrawing funds, taking about $21 billion out of Indian stocks. The current surge in demand has completely offset the effect of past sell-offs.
Drivers of Capital Return
The key catalyst was the measures taken by the Reserve Bank of India (RBI). The regulator opened dollar/rupee forward contracts for new FCNR (B) deposits, making them more attractive to foreigners. Additionally, starting April 1, 2026, authorities abolished the capital gains tax for foreign portfolio investors on the sale of government bonds. These steps created a favorable tax and currency environment.
Analysts at Goldman Sachs note that global funds still have significant room to increase their share in Indian assets. According to their assessment, current allocation is still below historical norms, and the stability of the rupee along with improved corporate earnings forecasts create conditions for further inflows.
The banking sector is of particular interest. In the two weeks leading up to June 30, foreigners invested about $1.5 billion in shares of Indian banks and financial companies. In June, net inflows into this sector amounted to $357 million, according to data from the National Securities Depository.
Forecasts and Prospects
Goldman Sachs expects the Nifty 50 index to reach 26,500 points by June 2027 — approximately 10% above current levels. This is a conservative but justified estimate, considering the gradual recovery in corporate profits.
My expert opinion: The return of foreign capital to India is not just a reaction to the RBI's tactical measures, but a structural trend. The country benefits from capital flows out of overheated markets in the US and China, as well as from its own reforms. However, investors should monitor inflation dynamics and the RBI's actions: any shift in monetary policy could quickly alter the current optimistic scenario.