Budget 2026: Foreigners can buy Indian stocks directly now - here's how it will impact Indian stock market

Union Budget 2026: Finance Minister Nirmala Sitharaman, in her Budget 2026 speech, announced a proposal to allow foreign individuals to buy Indian stocks directly, with the individual limit raised from 5% to 10% and the aggregate cap from 10% to 24%.

The budget’s increased focus on boosting NRI participation in Indian markets is both timely and strategically significant, especially as FPI inflows have slowed to near recent lows, according to market experts.

By easing participation thresholds under the Portfolio Investment Scheme and increasing overall foreign ownership limits, the measures substantially expand the base of long-term capital accessible to Indian companies.

“The expansion of the Portfolio Investment Scheme for overseas individuals is a meaningful signal that India wants to deepen and diversify foreign participation beyond large institutions. By allowing Persons Resident Outside India to invest directly in equity instruments and by doubling the per-investor limit from 5% to 10%, the government is clearly trying to widen the ownership base of Indian equities while keeping systemic risks contained through an overall cap,” said Sonam Srivastava, Founder and Fund Manager at Wright Research PMS.

Meanwhile, Divam Sharma- Co-Founder and Fund Manager at Green Portfolio PMS, believes that the growing role of evolved financial ecosystems such as GIFT City further strengthens this framework by providing globally competitive regulatory and operational platforms for cross-border investments.

“ Taken together, these measures improve India’s capital-market depth, diversify sources of foreign inflows, and reinforce the country’s positioning as a preferred destination for global investors seeking exposure to high-growth emerging-market opportunities,” Sharma said.

What does it mean for the Indian stock market?

Sonam Srivastava of Wright Research PMS further explained that this matters less for immediate flows and more for structure, from a market's perspective.

“ PROI investors tend to be long-term, often with personal or economic links to India, and their capital is typically stickier than hot money flows. Increasing the aggregate cap from 10% to 24% meaningfully expands headroom, especially in mid- and large-cap names where foreign ownership limits often become binding constraints. Over time, this can improve liquidity, reduce volatility at the margin, and support better price discovery,” she added.

On the other hand, Seema Srivastava, Senior Research Analyst at SMC Global Securities, highlighted that higher foreign participation can lower the cost of capital for Indian companies, support better price discovery, and reduce volatility over the long term.

“The move also signals regulatory confidence and openness, enhancing India’s attractiveness as a global investment destination and potentially driving sustained FPI inflows and valuation re-rating across sectors,” Srivastava said.

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