- Foreign selling in Indian equities has peaked, says Goldman Sachs report titled 'Room To Rebound'
- Global investors sold a record $30 billion of Indian equities in early 2026 before turning net buyers
- Foreign inflows of $2 billion since mid-June focused mainly on financial sector stocks
It's not just the English football fans that are singing, "It's Coming Home" relentlessly. It's the investors on Dalal Street as well. Why? The worst of foreign selling in Indian equities is behind us, according to Goldman Sachs which believes that the sentiment is set to turn "incrementally favourable" on an improving domestic outlook and what it calls "ultra-light foreign positioning."
In a report titled "Room To Rebound", the brokerage's India strategy team, led by Amorita Goel, Sunil Koul and Timothy Moe, noted that global equity investors used India as a funding market through the first half of 2026, offloading a record $30 billion of Indian equities in roughly three and a half months. That marked the steepest such outflow in a short window on record for the market.
However, foreign institutional investors have turned net buyers since mid-June, with inflows of $2 billion, concentrated largely in financials. Goldman Sachs said global funds carry a large underweight position on India within emerging market portfolios, leaving "ample room" to neutralise this exposure as sentiment improves. Data cited in the report showed India as one of the most underweight markets among EM funds as of May, trailing only Taiwan and Korea in relative positioning terms.
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The brokerage flagged that financials bore the brunt of the selling, with foreigners pulling $12 billion in just the last four months, effectively wiping out a decade of cumulative inflows into the sector. As positioning resets, Goldman Sachs expects large-caps and banks, the most sold and reasonably valued pockets of the market, to be the biggest beneficiaries of any reversal. Foreign ownership in large-caps had dropped to decade-low levels in the first quarter, the report noted, even as it stayed relatively stable in mid-caps.
FII inflow has picked up steadily in India after a long spell of retreat.
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The brokerage cautioned that a continued earnings downgrade cycle and a still less attractive growth-valuation mix relative to other markets remain key investor concerns. Renewed geopolitical tensions in the Middle East could also fuel near-term volatility, it said.
Still, Goldman Sachs expects Nifty to recover towards its June 2027 target of 26,500, implying about 10% upside from current levels, following a 9% drawdown in the first half of the year. Stronger bond market inflows, estimated at around $60 billion for 2026 following the Reserve Bank of India's recent capital flow measures, are also expected to support the case for foreign money returning to Indian markets in the second half.
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