India’s stock markets are experiencing significant tailwinds, propelled by a powerful vote of confidence from investors. As the benchmark Nifty 50 and Sensex indices extended their gains into Friday’s close, the driving forces behind this optimism are coming into sharper focus, centering on strategic mega-investments and a resilient domestic economy.
A Global Shift and Domestic Resurgence
This positive momentum for funds tracking the Indian market, such as the iShares MSCI India ETF, aligns with a broader global trend. Since the start of 2026, approximately $75 billion has flowed into international equity ETFs. Investors are increasingly seeking diversification outside the United States, attracted by more compelling valuations elsewhere.
Within India, a notable resurgence of domestic retail investment is providing crucial market support. Data from the National Stock Exchange (NSE) reveals that net inflows into the secondary market reached about 169 billion rupees in January 2026. This marks the highest monthly figure in 14 months. This robust internal demand acts as a liquidity buffer, reducing the market’s dependency on more volatile foreign capital flows. An interesting structural shift accompanied this inflow: for the first time since 2003, proprietary traders accounted for 34.3% of trading volume, surpassing the share of retail investors.
Reliance Industries: A Colossal Bet on the Future
A primary engine for the MSCI India Index’s strength is the conglomerate Reliance Industries Ltd (RIL). The company’s ambitious vision is a key market catalyst. Analysts at Morgan Stanley reinforced their “Overweight” rating on the stock on Friday, setting a price target of 1,803 rupees and implying an upside potential of roughly 28%.
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This analyst confidence is underpinned by Reliance’s staggering investment blueprint. The firm plans to deploy around $110 billion over the next seven years into artificial intelligence (AI), digital infrastructure, and renewable energy. Market experts highlight that the initial phase of a capacity expansion is scheduled to become operational in the second half of 2026. The company possesses the necessary financial firepower to execute this plan, generating an annual operational cash flow in the range of $14 to $15 billion.
Sector Strength and Future Catalysts
Beyond the technology-driven narrative surrounding Reliance, the financial sector is demonstrating notable robustness. Public sector banks, in particular, bolstered recent market movements, posting a weekly gain of 5.5%.
Looking ahead, investor attention will zero in on the execution of Reliance’s AI strategy, with the first capacity rollout expected later this year. Furthermore, the trajectory of Foreign Portfolio Investor (FPI) flows remains a critical variable. FPI ownership of Indian companies recently hit a 15-year low. A recovery in this metric, potentially fueled by the persistent weakness of the US dollar since early 2025, could act as an additional catalyst for the ongoing market rally.
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