The Indian stock market is experiencing a powerful reversal. In the week from July 5 to 9, foreign funds invested a record $1.3 billion in local equities — the largest weekly capital inflow since June 2025. The trend of global capital returning is becoming evident: on Friday, July 10 alone, foreign investors purchased $272 million worth of securities in the domestic market.
The preceding period was grim. From January to May 2026, non-residents withdrew approximately $21 billion from Indian equities. However, the situation has now changed dramatically. In the two weeks leading up to June 30, foreign players invested about $1.5 billion in bank and financial company stocks. According to the National Securities Depository, net inflows into the banking sector in June amounted to $357 million, completely offsetting sales from previous months.
What triggered the reversal?
The key catalyst was the actions of the Reserve Bank of India (RBI). The regulator opened new dollar-rupee forward contracts for FCNR (B) deposits, making them more attractive to foreigners. Additionally, starting April 1, 2026, authorities abolished the capital gains tax for foreign portfolio investors when selling government bonds.
Against this backdrop, Goldman Sachs revised its forecast for the Indian market upward. The bank's analysts expect the Nifty 50 index to reach 26,500 points by June 2027 — approximately 10% above current levels.
"Global funds still have significant room to return to Indian equities due to substantial underweight positions in their portfolios. Despite concerns over continued downward revisions in earnings forecasts, growing certainty about the domestic recovery could serve as a catalyst for prematurely pricing in the upcoming upturn," noted Timothy Moe, co-chair of Asia macro research at Goldman Sachs.
My analysis: this is not just a short-term spike. India is regaining its status as one of the key destinations for global capital. The combination of tax incentives, a stable rupee, and clear yield forecasts creates a strong foundation for long-term inflows. Given the current underrepresentation of Indian assets in international fund portfolios, the growth potential here remains significant.