Foreign Investors Return to Indian Markets as Rupee Stabilises and Earnings Gain Momentum, Says Motilal Oswal

Foreign institutional investors are returning to Indian equity markets, reversing a two-year trend of selling as currency conditions stabilize and corporate earnings gain momentum, according to Motilal Oswal, Group Managing Director and CEO of Motilal Oswal Financial Services.

What Happened

Speaking at the 9th edition of the Motilal Oswal Business Impact Conference (MOBIC) in Mumbai, Motilal Oswal stated that feedback from global investors points to a stabilization of capital flows. Following sustained selling over recent years, net foreign inflows resumed in July as overseas funds engaged in value buying across the Indian market.

Key Highlights

• Foreign investment trends are shifting from selling to net inflows, with July showing positive capital flow.
• Rupee stability and reduced anxiety regarding geopolitical conflicts and crude oil prices have helped improve global sentiment.
• Corporate performance is supporting market momentum, with mid-cap company profit growth standing at 27 percent in 2026 and overall earnings projected to grow between 15 and 17 percent this year.
• Domestic institutional and retail support remains strong through Systematic Investment Plans (SIPs) and household savings.
• Market participants are keeping an eye on equity supply levels from initial public offerings (IPOs) and qualified institutional placements (QIPs).

Why This Matters

Oswal explained that India offers long-term structural economic growth characterized by both scale and speed, making it an attractive destination for foreign capital despite short-term currency volatility. While index earnings were moderate over the previous two years, strong earnings growth in mid-cap companies and anticipated broad-based earnings recovery are providing fundamental support to market valuations.

What to Watch Next

Market performance in the coming months will depend on whether domestic SIP inflows continue to absorb new equity supply coming from IPOs and QIPs, alongside the ongoing trend of foreign capital allocations.

Frequently Asked Questions

Why are foreign investors returning to Indian equities?

Foreign investors are returning due to value buying, improved stability in the Indian rupee, easing worries over crude oil prices and geopolitical tensions, and an encouraging corporate earnings outlook.

What is the earnings growth projection for Indian companies?

According to Motilal Oswal, corporate earnings growth is expected to range between 15 and 17 percent this year, following a 27 percent profit growth recorded by mid-cap companies in 2026.

Source: ANI