The Indian stock market is experiencing a powerful reversal. Between July 5 and 9, foreign funds invested $1.3 billion in local securities — the largest weekly inflow since June 2025. On Friday, July 10 alone, foreign investors purchased $272 million worth of shares on the domestic market.
This dynamic sharply contrasts with the trend of the first half of 2026. From January to May, non-residents withdrew about $21 billion from Indian stocks. However, the vector has now changed, and there are compelling reasons for this.
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 foreigners. Additionally, starting April 1, 2026, authorities abolished the capital gains tax for foreign portfolio investors on the sale or income from government bonds.
These steps have already borne fruit. According to the National Securities Depository, demand has completely offset the sales of previous months. In June, India's banking sector received a net inflow of $357 million.
Analyst forecasts: Is there potential for growth?
Goldman Sachs experts believe that the current surge is just the beginning. According to their assessment, the share of foreign investments in Indian assets is still small, meaning there is significant room for increasing positions. The stability of the rupee and clearer yield forecasts create a favorable backdrop.
Bank analysts expect the Nifty 50 index to reach 26,500 points by June 2027 — approximately 10% above current levels. The report emphasizes that global funds still have "a large reserve for returning to Indian stocks" due to a significant underweight in their portfolios.
My expert opinion: The trend reversal in India is a classic example of how sound regulatory policy can restore investor confidence. The abolition of taxes and the mitigation of currency risks make the Indian market one of the most attractive in Asia. For crypto investors, this is also a signal: traditional markets are beginning to compete for capital, which could temporarily divert liquidity from digital assets. However, the long-term positive outlook for India is a plus for the global economy as a whole.