Foreign funds buy $1.6bn Indian equities as outlook brightens
Foreign investors have poured over $1.5 billion into Indian equities this week, marking the strongest weekly buying streak in over a year as stabilising commodity prices and a steady rupee improve the market's risk-reward profile.
Global funds purchased a net $1.3 billion of Indian shares in the four days through July 9, with provisional data pointing to an additional $272 million inflow on Friday. This buying pace sets the stage for the largest weekly accumulation by foreign investors since at least June last year. The purchases extend a broader turnaround that has seen offshore money flow into Indian stocks for four consecutive weeks.
The renewed appetite marks a significant shift in sentiment, though the broader annual picture remains heavily skewed towards selling. Despite the recent four-week surge, foreign investors are still net sellers of approximately $27 billion in Indian equities for the year. This suggests the current buying is driven by short-term positioning and tactical allocations rather than a fundamental reassessment of the entire year's strategy.
The turnaround is being driven by a notable improvement in India's macroeconomic backdrop. The Nifty 50 index has rebounded roughly 8% since hitting a one-year low in April. A key factor has been the decline in oil prices, which has helped stabilise the rupee and substantially reduce input costs for domestic companies. This macro stabilization is flowing through to corporate earnings forecasts, which have largely held up despite earlier market turbulence.
Major banks are increasingly vocal about the changing valuation dynamics. “India’s outlook has improved in recent weeks, amid lower commodity prices, stabilized currency, resilient domestic growth, healthy earnings expectations in 2Q, and potential recovery in select domestic pockets,” Goldman Sachs strategists including Amorita Goel wrote in a July 11 note. They highlighted that foreign holdings are currently unusually light, creating a technical catalyst for further inflows. “With ultra-light foreign positioning, we see ample room for flows to return.”
Citigroup echoed this assessment last week, noting that Indian equities now present a highly favourable risk-reward proposition for institutional money managers. Because corporate earnings estimates have resisted downward revisions even as the broader index corrected earlier in the year, valuations have reset to attractive entry points. For portfolio managers tracking emerging markets, India is once again competing for capital allocations after months of persistent foreign withdrawals.
