- Foreign individuals allowed to invest directly via Portfolio Investment Scheme.
- Individual cap raised to 10%; aggregate cap increased to 24%.
- Move aims to deepen capital markets and improve price discovery.
The foreign individuals invest in Indian equities reform emerged as a standout capital markets measure in the Union Budget 2026. Finance Minister Nirmala Sitharaman announced that individuals residing outside India will now be permitted to invest directly in Indian stocks under the Portfolio Investment Scheme (PIS).
The individual investment limit is proposed to rise from 5% to 10%, while the aggregate cap for all such foreign individual investors will increase from 10% to 24%.
Deeper Global Participation in Indian Markets
Sitharaman said the change will allow serious overseas individual investors to take more meaningful stakes in Indian companies. This could enhance price discovery, broaden shareholding patterns, and support long-term capital formation.
Analysts view the step as part of India’s effort to align domestic markets more closely with global capital flows.
Supporting Reforms in Market Infrastructure
Officials indicated the move complements a wider reform package that includes:
- A market-making framework for corporate bonds
- A review of the Foreign Exchange Management framework to improve liquidity and investor confidence
Together, these steps aim to strengthen market depth and resilience.
Context: Foreign Outflows and Domestic Participation
The announcement comes at a time when foreign portfolio investors have reduced exposure to Indian equities amid global uncertainties and valuation concerns. Meanwhile, domestic institutional investors have expanded their footprint, reflecting rising retail and domestic participation.
Easing PIS limits could help restore overseas investor confidence, though some experts caution that source-based capital gains taxation may still deter certain investors.
The measure signals India’s intent to attract stable, long-term foreign capital while continuing broader financial ecosystem reforms.
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