Global brokerage Goldman Sachs believes the prolonged selling by foreign investors in Indian equities may be nearing its end. In its latest India Strategy Report for July, the investment bank said improving domestic economic conditions and light foreign investor positioning could drive renewed interest in Indian stocks over the coming months.
The brokerage has also maintained a positive outlook for the Indian market, forecasting that the Nifty 50 index could climb to 26,500 by June 2027, implying an upside potential of around 10% from current levels. However, it cautioned that geopolitical tensions in West Asia could continue to create short-term volatility.
Goldman Sachs Expects Foreign Investor Sentiment to Improve
According to Goldman Sachs analysts Timothy Moe, Amorita Goel, and Sunil Koul, investor confidence in Indian equities is expected to strengthen as India’s macroeconomic fundamentals continue to improve.
The report noted that foreign institutional investors (FIIs) remain significantly underweight on Indian stocks. As economic growth gains momentum and corporate earnings remain resilient, overseas investors may gradually increase their exposure to the Indian market.
Goldman Sachs believes that this combination of stronger domestic fundamentals and renewed foreign inflows could support Indian equities over the next year.
A Shift From Goldman Sachs’ Earlier View
The latest report marks a notable change in Goldman Sachs’ outlook.
In May 2026, the global investment bank had taken a more cautious stance on Indian equities, stating that the risk-reward profile was less attractive compared with several North Asian markets.
At the time, the brokerage also expressed concerns that foreign investors would remain reluctant to return to India even if crude oil prices declined. It had additionally highlighted the growing impact of artificial intelligence (AI) on India’s services sector as a factor weighing on investor sentiment.
The latest report indicates that Goldman Sachs now sees improving conditions that could encourage overseas investors to re-enter the market.
Foreign Selling Appears to Be Losing Momentum
The report pointed out that India served as a funding market for global investors during the first half of 2026.
Over a period of just three-and-a-half months, foreign investors sold a record USD 30 billion worth of Indian equities as they shifted capital to other markets.
However, this trend has started to reverse.
Since mid-June, overseas investors have become modest net buyers, investing nearly USD 2 billion into Indian stocks. Financial sector companies have attracted the largest share of these fresh inflows.
FIIs Still Remain Net Sellers in FY27
Despite the recent buying activity, foreign institutional investors continue to be net sellers for the current financial year.
According to market data, FIIs have withdrawn approximately ₹1.28 lakh crore from Indian equities so far in FY27.
In June, foreign investors sold shares worth ₹49,340 crore, extending the selling trend.
The mood improved in July, with FIIs turning net buyers and investing ₹15,157 crore in Indian equities, according to data released by the National Securities Depository Limited (NSDL).
Positive Long-Term Outlook for Indian Equities
Goldman Sachs remains optimistic about India’s medium-term market prospects.
The brokerage believes that stronger domestic economic growth, easing foreign underweight positions, and gradually improving capital inflows could provide sustained support to Indian equities over the coming months.
Nevertheless, the firm warned that geopolitical developments in West Asia remain a key risk. Any escalation in regional tensions could trigger periods of heightened market volatility, even as the long-term outlook for Indian equities stays positive.
Overall, Goldman Sachs expects India’s improving economic fundamentals and the gradual return of foreign investment to create a favourable environment for the stock market, with the Nifty 50 potentially reaching 26,500 by June 2027 if current trends continue.