Foreign investors have returned to Indian equities, purchasing more than $1 billion of local shares last week as a stable rupee and improving earnings expectations encouraged global funds to increase their exposure. International investors bought a net $1.3 billion of Indian equities during the four days through July 9, representing the largest weekly purchase since at least June last year, according to data compiled by Bloomberg. They added another $272 million of Indian shares on Friday, July 10, extending a four-week run of net foreign buying.
Goldman Sachs Group NYSE:GS, whose strategists assess Indian equity markets, expects further inflows as lower commodity prices, a stabilized currency, resilient domestic growth and healthy second-quarter earnings expectations improve India's investment outlook. Strategists including Amorita Goel noted that foreign positioning remains exceptionally light, suggesting global funds may have substantial room to rebuild their Indian equity holdings. This potential return of international capital could support the NSE Nifty 50's recovery after the benchmark rebounded about 8% from the one-year low it reached in April.
Lower oil prices and a stable rupee may also strengthen expectations for Indian corporate earnings, adding another possible source of support for the broader market. Citigroup, which recently evaluated Indian equity valuations and earnings estimates, said the market offers favorable risk-reward conditions as valuations remain reasonable and earnings projections have held up. However, foreign funds remain net sellers of roughly $27 billion of Indian equities this year, suggesting that the recent four-week buying streak has recovered only a portion of the capital previously withdrawn.