India's stock market is approaching historical highs.
According to media data, as of the 27th, foreign investors in the Indian stock market have withdrawn more than US $17 billion in funds this year, falling to a multi-year low, in sharp contrast to the net inflow of foreign funds of US $20 billion in 2023. This also makes India the market with the worst foreign portfolio outflows in Asia.
Despite a significant outflow of foreign capital, India’s Nifty 50 index fell six days in a row last week, climbing its longest consecutive record since September 12, approaching its historic high. On Friday, the Gift Nifty futures rose to 26,300 points, indicating that the Indian stock market is expected to break its pre-term high. The Gift Nifty futures is a dollar-valued derivative contract that tracks the performance of the Nifty 50 index. On 29th, the Nifty 50 index 2,6011.30 points, continuing to hover near its historic highs. This month is also expected to record its best performance since March.
India is closer to a trade deal
Currently, the United States and India are close to reaching a trade agreement, and the United States may reduce tariffs on India from 50% to 15% to 16%. According to Indian media reports, energy and agriculture have become core issues as key chips in the negotiations. India may agree to gradually reduce oil imports from Russia in exchange for tariff concessions from the United States. It is reported that the first phase of the trade agreement is expected to be finalized between October and November. The goal of the agreement is to increase bilateral trade volume to US$500 billion by 2030.
Analysts believe that if the agreement is reached, it will eliminate market uncertainty and trigger a new round of bull market. The Nifty index is expected to hit 30,000 points. Harshal Dasani, head of PMS business at INVAsset, said that the India-US trade agreement has always been the only unresolved factor affecting the market. If the United States reduces tariffs on India to 15% to 16% in the future, it may become a catalyst for a new wave of rises. With global risk appetite holding steady and domestic liquidity in India at historically high levels, any positive developments on the trade front could trigger a new bull market. He believes that with the return of momentum in various sectors, the Nifty index may move towards 30,000 points in the next 8 to 9 months.
Foreign investments significantly withdrew from the Indian stock market this year, which had previously been sold for three consecutive months, but this month has shifted to net-buying Indian stocks of 73.62 billion rubles.BayFort Capital strategic adviser and market senior Sunil Subramaniam said that if the US-India trade agreement rumors are true, it could trigger foreign institutional investors to return to the Indian market, "when the market will not have a ceiling."
Changes in investor structure
In addition to the news that the trade agreement is expected to be reached, there are more critical reasons why the Indian stock market can still approach historical highs again despite the sharp outflow of foreign capital this year. Since last year, a number of institutional analysts interviewed by China Business News have said that the Indian stock market has shifted from extreme dependence on foreign capital over the past years to more dependence on local investors, and India's strong economy, continuous reforms, political stability, and corporate profit growth have declined but still considerable multiple factors, which support their structural optimism about the Indian stock market.
Statistics show that before 2015, the rise and fall of the Nifty Index often kept pace with the flow of foreign capital. However, in 2018, 2022, 2024 and 2025, despite foreign capital outflows and selling, the Nifty Index continued to rise. The pool of funds from domestic mutual funds, insurance companies and millions of retail investors in India has expanded rapidly and now dominates the IPO space. According to capital market data provider Prime Database, in the only three years in the history of annual IPO financing exceeding 1 trillion rupees (US $11.3 billion)-2021, 2024 and 2025, local investors' investment in IPOs accounted for more than foreign capital. Since the beginning of 2024, indigenous investors in India have poured a total of Rs 979 billion into Indian IPOs, while foreign funds have invested Rs 790 billion in the same period. Especially in 2025, local investors will account for 74.8% of IPO investments, while foreign investors will only account for 25.2%.
The situation in India’s IPO market is also a reflection of the overall investment structure of its market value of $5.3 trillion. In the context of a decade-long rise in the Indian stock market, the popularity of mobile trading apps, the convenience of opening accounts and the surge in investment content on social media have created millions of first-time stock investors for India. According to data from the National Stock Exchange of India Ltd, as of June, the shareholding of domestic institutional investors in more than 2,000 companies listed on the exchange has risen for five consecutive quarters to 19.2%, the highest level in 25 years.
Abhinav Bharti, head of India equity capital markets at JPMorgan Chase, said: "The investment structure of the Indian stock market is undergoing a tremendous change. Native Indian households are putting more and more of their savings into stocks and Indian capital markets through mutual funds." He added that barring any shocks, these local funds will become the cornerstone of India's stock market's core investment needs in the coming years.
According to data compiled by the media, while $17 billion of foreign capital has leaked out of the Indian stock market since this year, recording the second largest outflow of money ever, domestic investors in India, mainly joint funds and insurance companies, have cumulatively invested more than $70 billion.At the same time, the weighted average return rate for new stock investment in India since this year is 18%, which is more than the 9.7% increase in the Nifty 50 index.
For some global companies, the "greedy appetite" of local investors in India also makes listing in the Indian stock market one of the first choices. Vivek Toshniwal, CEO of Plutus Wealth Management LLP, a family wealth firm in Mumbai, said: "We have had roadshows almost every day since the beginning of this year. Such excitement is unprecedented." According to data compiled by the media, more than 300 listed companies have raised nearly $16 billion from 2025 to date through IPOs in the Indian stock market, making India the fourth largest IPO location in the world. In Asia, it is second only to mainland China and Hong Kong.
Potential risks
However, this excitement of the Indian stock market and the IPO boom are also accompanied by risks. Some companies are overvalued, with many small IPOs over-acquisition rates exceeding 100 times, and have raised investor concerns. Pratik Loonker, chief executive of the Axis Capital stock market and co-director of the Financial Investors Group, said that even under the current global rate-reduction cycle, this is also a potential risk. The wrong valuation of IPOs, which may at some point in the future, suppress the previously resilient stock market and if the listings of five or six major IPOs are not good, may soon destroy the rising Indian stock market and the IPO issue.
In addition, although the investment structure has changed, the Securities and Exchange Commission of India has recently introduced a series of intensive measures after a large outflow of foreign capital. On the one hand, the agency has significantly reduced the investor review process, including allowing overseas Indian people to quickly open investment accounts in the Indian stock market without having to go to India to handle it. On the other hand, the agency has also introduced measures to allow more investors to obtain funds through bank credit to invest in the Indian stock market when certain conditions are met. A spokesperson for the agency said that the Bank of India has launched 11 reform measures aimed at improving foreign investors 'access to the Indian market. Possible changes include further relaxation of bank supervision.