In a remarkable turnaround, global investors have poured over $1 billion into Indian equities within just four days leading up to July 9, marking the most substantial weekly influx since at least mid-2025, as reported by Bloomberg.
Goldman Sachs anticipates that this buying trend will persist. The firm highlights that investors' 'underweight positioning' in Indian stocks offers significant potential for further investments, particularly as the Indian rupee stabilizes and earnings forecasts improve.
This surge follows a prolonged period in 2026 when foreign funds largely withdrew from the Indian market, with net outflows amounting to $21 billion between January and May. However, the recent trend indicates a shift, as Bloomberg noted that foreign investors have reacquired $1.3 billion worth of Indian equities by July 9, including an additional $272 million in local shares just on Friday.
Significantly, this uptick in investment comes after foreign buyers injected approximately $1.5 billion into the banking and financial sectors over the two weeks prior to June 30, effectively reversing earlier selling patterns and resulting in net inflows of $357 million for June, according to data from National Securities Depository Ltd.
The Reserve Bank of India (RBI) has played a crucial role in this shift by implementing various measures to attract foreign capital. These include the introduction of a US Dollar-Rupee Forex Swap Facility for new FCNR (B) deposits. Additionally, a tax policy change effective from April 1, 2026, will eliminate capital gains taxes for foreign portfolio investors (FPIs) on the sale or interest from government securities.
Goldman Sachs has also adopted a more bullish outlook. Timothy Moe, co-head of Asia macro research, noted that with global funds still underweight in Indian equities, there remains considerable room for investors to adjust their positions. He acknowledged that while concerns over ongoing earnings downgrades and less favorable growth-valuation dynamics compared to other markets persist, improved visibility regarding domestic recovery could motivate investors to begin pricing in an anticipated rebound.
Analysts are projecting the Nifty 50 index to reach 26,500 by June 2027, representing a roughly 10% increase from current levels.
This material is for informational purposes only and should not be considered as financial advice.
