Foreign funds increased investments in Indian stocks to $1.3 billion over the week: a trend of capital return
Global investors have once again turned their attention to the Indian stock market. In the week from July 5 to July 9, foreign funds purchased local securities worth $1.3 billion, marking the largest weekly inflow since June 2025. On Friday, July 10, purchases continued, with an additional $272 million invested in the domestic market.
Trend reversal after massive outflow
It is worth noting that from January to May 2026, foreign investors actively withdrew funds from India, pulling out about $21 billion from equities. However, the dynamics have now changed dramatically. In the two weeks leading up to the end of June, foreign players invested approximately $1.5 billion in shares of Indian banks and financial companies. According to the National Securities Depository, the net inflow into the banking sector in June amounted to $357 million, fully offsetting sales from previous months.
What triggered the return of capital
The key catalyst was the measures taken by the Reserve Bank of India (RBI). The regulator opened dollar-rupee forward contracts for new deposits under the FCNR (B) scheme, making them more attractive to non-residents. Additionally, starting April 1, 2026, authorities abolished the capital gains tax for foreign portfolio investors on the sale of government bonds and income derived from them.
Against this backdrop, Goldman Sachs analysts revised their outlook on the Indian market upward. According to their estimates, global funds still have significant potential to increase their share in Indian assets, given the current underweight in portfolios. The Nifty 50 index is expected to reach 26,500 points by June 2027, approximately 10% higher than current levels.
My view: The return of foreign capital to India is not just a temporary surge but a structural shift. The stability of the rupee, tax incentives, and clear signals from the RBI create a foundation for long-term growth. The Indian market now looks like one of the most promising among emerging markets, especially against the backdrop of a slowdown in China and uncertainty in other regions. Investors should take a close look at the banking sector and financial companies—they are becoming the main beneficiaries of the new liquidity inflow.