Indian Markets Underperform as Nifty 50 Drops 5% Amid Global Emerging Market Rally
The Indian stock market has declined significantly over the past three months, with the Nifty 50 falling 5.00%. This makes India the only underperforming emerging market during this period. The Indian rupee has also hit a record low of 88.31 against the US dollar, depreciating by over 3.00%. In contrast, other Asian markets have shown strong performance, with China's CSI 300 Index up 17.40%, Korea's Kospi up 15.50%, and Taiwan's TAIEX up 10.30%. Foreign portfolio investors have been net sellers, with year-to-date outflows of $15.20 billion, while domestic investors have injected $58.00 billion. The Nifty 50 trades at a premium with a forward earnings multiple of 22.40×, compared to lower multiples for other Asian indices. Analysts project a modest 9.00% EPS growth for Nifty 50 companies in FY26. The benchmark 10-year bond yield has risen to 6.57%, reflecting stronger economic data and reduced expectations for near-term interest rate cuts.
*this image is generated using AI for illustrative purposes only.
The Indian stock market has experienced a significant downturn, standing out as the sole underperformer among emerging markets over the past three months. This decline comes amid a broader rally in other Asian markets, raising concerns about India's economic outlook and investor sentiment.
Nifty 50's Decline and Rupee Depreciation
The Nifty 50, India's benchmark stock index, has fallen by 5.00% over a three-month period, making it the only emerging market to post negative returns during this timeframe. Simultaneously, the Indian rupee has hit a record low of 88.31 against the US dollar, depreciating by over 3.00% in three months—the steepest drop among Asian currencies.
Contrasting Performance with Other Asian Markets
While Indian markets struggled, other Asian indices showed remarkable strength:
| Index | Performance |
|---|---|
| China's CSI 300 Index | 17.40% |
| Korea's Kospi | 15.50% |
| Taiwan's TAIEX | 10.30% |
This stark contrast highlights the unique challenges facing the Indian market in the current global economic landscape.
Foreign Investment Outflows and Domestic Support
Foreign portfolio investors (FPIs) have been net sellers in the Indian market, with significant outflows observed:
- Recent outflow: $1.00 billion worth of shares sold on a single Friday
- Year-to-date outflows: $15.20 billion
Analysts attribute this exodus to several factors:
- Slower earnings growth expectations
- High valuations compared to peer markets
- Heightened geopolitical risk perceptions
However, domestic investors have shown resilience, injecting $58.00 billion into the market during the same period, partially offsetting the foreign outflows.
Valuation Concerns and Growth Projections
The Nifty 50 currently trades at a premium compared to its Asian counterparts:
| Index | Forward Earnings Multiple |
|---|---|
| Nifty 50 | 22.40× |
| China's CSI 300 | 14.50× |
| Korea's Kospi | 10.40× |
Despite the high valuations, analysts project modest growth for Nifty 50 companies, with earnings per share (EPS) expected to increase by approximately 9.00% in FY26.
Bond Market Reaction
The equity market turbulence has coincided with movements in the bond market:
- The benchmark 10-year bond yield has climbed to 6.57%
- This surge is attributed to stronger economic data
- Expectations for near-term interest rate cuts have diminished
As India navigates these challenging market conditions, investors and analysts will be closely monitoring economic indicators, corporate earnings, and global market trends for signs of potential recovery or further volatility.
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