The Indian stock market is experiencing a powerful influx of foreign capital. Between July 5 and 9, global funds purchased $1.3 billion worth of local equities. This is the largest weekly figure since June 2025. Notably, on Friday, July 10 alone, the volume of purchases in the domestic market amounted to $272 million.
This surge marks a decisive reversal after a prolonged period of outflows. From January to May 2026, foreign investors withdrew approximately $21 billion from Indian equities. However, the dynamics have now changed dramatically: the weekly inflow has almost completely offset the sales of previous months.
Turning Point Factors: RBI Policy and Tax Relief
The key catalyst for the return of capital was the measures taken by the Reserve Bank of India (RBI). The regulator opened USD/INR forward contracts for new FCNR (B) deposits, making such deposits significantly more attractive for non-residents. Additionally, from April 1, 2026, authorities abolished the capital gains tax for foreign portfolio investors on the sale of government bonds.
These steps have created a favorable regulatory environment. The stability of the rupee and clearer yield forecasts have become powerful magnets for global capital. India's banking sector, in particular, received a net inflow of $357 million in June, confirming the renewed interest in fundamentally strong industries.
Forecasts and Potential: Goldman Sachs Sees Room for Growth
Goldman Sachs analysts believe the current inflow is just the beginning. According to their estimates, the share of foreign investments in Indian assets is still relatively small, leaving significant room for position building. Despite lingering concerns about earnings forecast revisions, growing certainty regarding the domestic recovery could prompt market participants to hedge against a future upswing in advance.
The bank's experts expect the Nifty 50 index to reach the 26,500 mark by June 2027. This is approximately 10% above current levels.
Cryptalist Commentary: The return of foreign money to India is not just a local surge but a symptom of a global reassessment of risks. Investors are tired of uncertainty in developed economies and are seeking growth points with clear regulatory signals. The RBI's actions are a model of how sound policy can reverse a negative trend. If Goldman Sachs' forecast proves correct, we will witness one of the most impressive rallies in Asian markets.