What changed
Indian equities have fallen for eight straight weeks despite economic growth above 7%, marking the Sensex and Nifty’s longest losing streak in 25 years. Households invested in the Nifty have lost about 15% this year, while foreign institutional investors have withdrawn $40bn over the past two years.
Why it matters
India’s economy can grow quickly while its stock market struggles because investors are pricing the cost of energy, money and currency risk.
India imports more than 90% of its crude requirements. Oil has stayed between $90 and $100 a barrel during the prolonged disruption around the Strait of Hormuz. That raises pressure on inflation, company margins and the wider economy.
Higher global interest rates add another squeeze. US government bond yields are above 5%, making relatively safer dollar assets more attractive than emerging-market shares. A weaker rupee then reduces foreign investors’ returns further when they convert them back into dollars.
The domestic money that has softened the decline is now exposed to it. Indian mutual-fund assets have grown to about $900bn, and more than 150 million people now invest in stocks and mutual funds. That has helped absorb foreign selling, but it also means the market’s downturn reaches directly into household savings while jobs, inflation and consumption are already under strain.
The key point is uncomfortable but simple: strong headline growth does not guarantee strong equity returns. Until energy costs, global yields and the rupee become less hostile, India’s economic success may continue to look better in national statistics than in investors’ accounts.
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