Global Banks Turn More Bullish As Foreign Money Floods Indian Stocks

What the banks are saying

HSBC upgraded India to overweight from neutral, arguing that earnings have held up and valuations look more reasonable. A team led by Herald van der Linde said in a note that "India offers diversification and low volatility in Asian markets dominated by AI stocks," adding they favor banks, industrials, consumer discretionary names, insurers and hospitals.

Citi took its 12 month Nifty target up to 28,000, nearly 8% higher, tying the move to improving profit growth and lower crude prices. Taken together, these calls point to a broader reset toward India after a long stretch of underperformance, as investors look for markets less exposed to worries about stretched AI valuations.

The money flowing in and the market move

The benchmark index has climbed nearly 8% this month, the strongest monthly gain since July 2022, putting India among the top performing major markets. Local equities eased on Monday as investors locked in some profits after the rally.

Over the four trading days ending Thursday, foreign funds logged net purchases of $3.6 billion in local equities, putting weekly flows on course for a record, and provisional data indicated an additional $1.5 billion bought on Friday. That surge follows two years when overseas investors trimmed India exposure while chasing AI related gains in Asia and the US, leaving positioning relatively light.

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What this could mean for your portfolio

Citi says there is substantial room for foreign positioning to rebuild. Analysts including Surendra Goyal and Vijit Jain estimate that if active funds lift their India weighting by 1 percentage point, about $12 billion could come in, after AI "crowded out almost everything else." They expect Nifty earnings to grow about 15% to 16% annually in fiscal years 2026 to 2028, and calculate that if oil falls by $10, Nifty earnings per share would rise roughly 2%.

In plain English: banks are warming up, money is coming back, and earnings math looks supportive if oil stays friendlier. How you size India in your portfolio may hinge on whether that flow and earnings story holds.

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