Wall Street warms to India’s markets as oil pressures fade

After spending more than a year on the sidelines, global investors are showing fresh interest in India as sentiment begins to improve across the country’s markets.

Citigroup Inc.’s India team returned from meetings with 36 US clients saying appetite for the country’s assets is reviving. Macquarie Capital Securities is seeing a pickup in customer queries after an extended lull. Goldman Sachs Group Inc. has turned more positive on the nation, while Barclays Plc says it may finally be time to view the world’s fastest-growing major economy as an investment opportunity.

India had fallen out of favor as investors chased markets with greater exposure to the artificial intelligence boom, while the energy shock triggered by the US-Iran war stoked concerns about the country’s external finances, pushing the rupee to record lows. As those pressures ease, bankers and investors say interest in local assets is beginning to recover.


“The 18-month long negative cycle on India is eclipsing fast,” K. Balasubramanian, Citigroup’s India chief executive officer, said in an interview. “Investor sentiment is on the cusp of changing. They are beginning to think about India, with the fiscal deficit narrowing and the rupee coming out of the rout loop.”

Policymakers have also helped the turnaround, as measures to draw foreign capital into government debt and shore up the rupee have boosted investor confidence.

The change is starting to show up in markets. Indian equities beat emerging-market peers in June by the most in seven months, global funds bought a record $4.4 billion of index-eligible government debt and foreign outflows from stocks were the smallest in four months. The rupee has rebounded, ranking as one of Asia’s strongest-performing currencies last month.

India’s lack of AI-linked plays may become less of a drawback as doubts grow over how long the rally in AI-heavy markets such as South Korea and Taiwan can last.

“Given the concentration risk sitting in Taiwan and South Korea, it’s hard to imagine active EM managers not rotating back into China and India,” said Steven Holden, founder of Copley Fund Research. The average portfolio weight among active emerging-market fund managers is at the lowest levels in 12 years for China and six years for India, he said.

There’s more. Local equities are also less volatile than most developing markets. The Nifty posted 38 sessions with moves of 1% or more in either direction in the first six months of 2026, versus 59 for MSCI’s emerging-market and Asian gauges. South Korea’s Kospi recorded 79 such sessions.

Oil has also moved in India’s favor. Brent has dropped about 30% in the June quarter and is back near pre-war levels, easing concerns for the world’s third-largest crude buyer. The decline has prompted Citigroup to raise its growth forecast for India, while Goldman Sachs favors 30-year government bonds as lower oil prices allay inflation and fiscal risks.

“The economy that was too expensive a year ago is now available at a meaningful discount while still growing near 7%,” Barclays economists Ajay Rajadhyaksha and Aastha Gudwani wrote in a recent note.

Not all of the risks have disappeared. A weak monsoon remains the biggest near-term threat, with a developing El Nino raising the risk of lower rainfall and higher food prices. The stronger dollar and expectations of higher-for-longer US interest rates could also temper inflows.

Still, policymakers have continued to boost confidence. New Delhi scrapped taxes on government debt held by foreigners, helping drive record inflows into index-eligible bonds, while the central bank moved to attract dollars through concessional swaps for overseas borrowings.

“Lower crude prices have helped sentiment, but the more important development has been the policy focus on stabilizing the rupee and encouraging fixed-income flows,” said Krishna Bhimavarapu, APAC economist at State Street Investment Management.

Goldman estimates another $15 billion in passive inflows if India is included in the Bloomberg Global Aggregate Index. Bloomberg LP, which offers index products for various asset classes through BISL, is the parent company of Bloomberg News.

“We are still in the early stages and many structural issues still remain,” said Nilesh Dhedhi, chief executive officer at Avendus Finance. “But I am confident that the period of persistent negativity is behind us.”