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Goldman Sachs believes the worst phase of the rupee’s decline may be over as India records more than $2 billion in foreign investor inflows after a key US trade deal. The shift comes after nearly $30 billion in selling since September 2024. Improved sentiment from global investors and strong emerging market flows could support Indian equities and help stabilize the rupee in the coming months.
According to Goldman Sachs Global EM Equity Strategist Sunil Koul, the worst phase of the rupee’s decline may already be behind. India has witnessed more than $2 billion in foreign investor inflows following a key US trade deal announcement, even after cumulative selling of nearly $30 billion from the September 2024 peak. The shift signals improving sentiment toward Indian equities and a potential stabilization phase for the currency.
After months of heavy foreign outflows and currency pressure, Indian markets are witnessing a renewed wave of foreign investor interest. According to insights from Goldman Sachs, global investors are once again turning their attention toward India, driven by improving macro conditions and structural growth prospects.
The recent US trade deal announcement has acted as a catalyst, triggering over $2 billion in foreign inflows into Indian equities. This comes despite significant selling pressure that had seen around $30 billion in outflows since September 2024.
For investors tracking rupee trends, foreign institutional investor (FII) flows, and emerging market equities, this shift could signal a turning point.
Sunil Koul, Global Emerging Markets Equity Strategist at Goldman Sachs, believes the currency has already absorbed much of the earlier pressure.
Koul noted that given these factors, a softer rupee was reasonable from a policy standpoint, as it helped balance trade dynamics and external pressures.
The recent shift in sentiment has been driven by improved global investor perception following the US trade agreement, which many market participants saw as a major uncertainty.
| Metric | Value |
|---|---|
| FII outflows since Sep 2024 peak | ~$30 billion |
| Recent inflows after trade deal | $2+ billion |
| Key investor regions | US and Europe |
| Market reaction | Improved sentiment |
According to Koul, there has been renewed interest from institutional clients in both the US and Europe, signaling a broader shift in global asset allocation.
Emerging markets have started seeing stronger inflows in 2026, and India is positioned as a key beneficiary.
Domestic demand-driven economy
Relative stability
Global diversification trend
Volatility in global tech stocks has prompted investors to look for:
India fits these criteria better than many other emerging markets.
The return of foreign capital can have significant implications for Indian stocks.
| Factor | Impact |
|---|---|
| Market liquidity | Improves trading volumes |
| Stock valuations | Supports higher multiples |
| Rupee stability | Reduces currency pressure |
| Investor confidence | Strengthens sentiment |
| Sector rotation | Boosts large-cap stocks |
Large-cap sectors that typically benefit from FII inflows include:
With foreign inflows returning, the pressure on the rupee could ease.
If the trend continues, the rupee could enter a more stable trading range, reducing volatility for investors and corporates.
Global emerging market equity funds have seen strong inflows in early 2026, creating a favorable backdrop for countries like India.
India is increasingly viewed as:
Certain sectors typically outperform when foreign investors return.
| Sector | Reason |
|---|---|
| Banking | High weight in indices |
| IT services | Global exposure |
| Capital goods | Capex cycle support |
| Consumer stocks | Domestic demand growth |
| Infrastructure | Government spending |
Investors should monitor the following metrics:
| Indicator | Why It Matters |
|---|---|
| FII net flows | Measures foreign sentiment |
| Rupee exchange rate | Currency stability signal |
| Bond yields | Impact on equity valuations |
| Inflation data | Influences interest rates |
| EM fund flows | Global capital movement trends |
“India’s appeal as a domestic-demand-driven market is becoming stronger, especially as global tech volatility pushes investors toward more stable growth stories. The return of foreign flows could mark the beginning of a more constructive phase for Indian equities.”
Investors tracking FII flows and rupee trends can use:
Goldman Sachs’ view that the worst of the rupee’s decline may be over marks an important sentiment shift for Indian markets. With more than $2 billion in fresh foreign inflows after a period of heavy selling, the equity market could see improved stability and liquidity.
If global flows into emerging markets continue, India could remain a key destination for foreign capital, driven by strong domestic demand and structural growth prospects.
⚠️ DISCLAIMER: We Are Not Financial Advisors This article is for informational purposes only. Investments carry risks. Please consult a financial advisor before making investment decisions.
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