New Delhi: Foreign institutional investors' (FII) flows will "gradually return" to India despite the recent flare up in tensions in West Asia, and the NSE's 50-share benchmark Nifty index is estimated to rise 10 percent to be at 26,500 points in a year, an American brokerage said on Monday.
Follow The PSUWatch Channel on WhatsApp
"Foreign selling is likely over, and sentiment should turn incrementally favourable on improved domestic outlook and ultra-light foreign positioning," said Goldman Sachs in a note.
The note underlined that India has been used as a funding market in the first half of 2026, leading to record outflows of USD 30 billion in a short span of over three months, but added that investors have turned net buyers since mid-June, pumping in USD 2 billion.
Most of the buying is in the financial sector, it said, adding that with a large underweight positioning towards Indian equities, global funds have ample room to neutralise their exposures.
Investor concerns at the current point of time for such FIIs will include continuing earnings downgrade cycle and still less attractive growth-valuation mix relative to other markets, the brokerage said.
However, improving visibility on domestic recovery will act as a catalyst for investors to start pricing in the anticipated recovery in advance, it added.
From a market perspective, it acknowledged that the NIFTY returns were at a three-decade low in the first half of 2026, with the index down 9 percent, but added that it sees room to rebound.
Follow PSU Watch on LinkedIN
"...while renewed geopolitical tensions in the Middle East may fuel near-term volatility, as domestic recovery starts to get priced in, we expect NIFTY to rebound towards our June'27 target of 26,500, implying a 10 percent upside from current levels," it said.
Large-caps have seen relatively shallower earnings cuts than the Mid-caps in 1H2026 and provide better earnings visibility, the report said, pointing to banks, power, and domestic over exports as the best bets.
(PSU Watch is India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy. 👉 Click to join our channel now: PSUWatch WhatsApp Channel. Prefer LinkedIn? Follow PSU Watch on LinkedIN. Click to stay connected on Twitter here and stay updated)