Global brokerage Goldman Sachs expects foreign institutional investors to return to India, forecasting the Nifty 50 index to rise 10% to 26,500 by June 2027. Following record outflows of $30 billion in early 2026, recent data shows a shift back to net buying, primarily in the financial sector.
Foreign institutional investors, often referred to as FIIs, are showing signs of returning to the Indian equity market, according to a report from Goldman Sachs. The brokerage anticipates that the recent period of intense selling is nearing its end. This outlook comes after a challenging first half of 2026, during which India saw outflows of $30 billion in just over three months. Since mid-June 2026, however, investors have turned into net buyers, injecting $2 billion into the market.
Financial Sector Leads Renewed Interest
Recent data indicates that the bulk of this renewed buying is concentrated in the financial sector. While global funds have been underweight on Indian equities for some time, they now hold significant room to increase their holdings. The report highlights that the Nifty 50 index experienced its weakest first-half performance in three decades, declining 9%. Despite this, the brokerage maintains a positive view for the period leading up to mid-2027.
Domestic Recovery and Potential Risks
Goldman Sachs identifies the domestic economic recovery as a primary driver for a potential rebound. As markets begin to price in this anticipated improvement, the brokerage expects the Nifty 50 to reach 26,500 by June 2027, representing a 10% gain from current levels. The report suggests that large-cap stocks, particularly those in the banking and power sectors, may offer better stability compared to export-oriented companies, which may face more earnings pressure.
Investors should note that this outlook is not without challenges. The report acknowledges that the market is currently navigating an earnings downgrade cycle, where companies have reported profit growth lower than initial analyst expectations. Furthermore, the growth-valuation mix in India is currently viewed as less attractive than in some other global markets. Additionally, while the brokerage expects a recovery, it also warns that geopolitical tensions in the Middle East could cause short-term market price swings.
For investors, the key monitorable remains how effectively domestic earnings growth can recover to justify current market valuations. Future updates regarding FII flow patterns, the stability of the rupee, and quarterly earnings reports from major financial institutions will be important factors to track to see if the market follows the projected recovery path.