India’s stock market is facing a turbulent phase as global investors remain hesitant despite a massive $1.3 trillion market wipeout. A combination of economic slowdown, corporate profit downgrades, and concerns over potential US tariffs has led to an extended selloff, making it difficult for the market to recover.
Investor Sentiment Turns Cautious
Despite falling equity valuations, global fund managers are in no rush to reinvest in Indian stocks. The much-hyped rotation of investment from China to India has reversed as traders now see more opportunities in Chinese equities, which are benefiting from an AI-driven bull run. In contrast, India’s economic growth is returning to its pre-COVID levels, dampening investor enthusiasm.
Foreign investors have already pulled nearly $15 billion from Indian stocks in 2025, putting outflows on track to surpass the record $17 billion seen in 2022. The NSE Nifty 50 Index, which was trading at 21 times forward earnings in September, has now dropped to 18 times. However, this valuation is still higher than all other emerging Asian markets, making Indian stocks relatively expensive compared to their peers.
Slower Economic Growth and Profit Downgrades
The Indian economy is expected to grow at 6.5% in the current fiscal year, the slowest pace in four years. This is a significant decline from the nearly 9% average growth seen in the past three years. A drop in consumer spending—both in urban and rural areas—is adding to concerns about the overall economic outlook.
Corporate earnings have also taken a hit. More than 60% of the companies in the Nifty 50 Index saw their forward profit estimates downgraded last month, according to JM Financial Ltd. Bloomberg Intelligence reports that India’s earnings revision momentum is among the weakest in developing economies across Asia, further shaking investor confidence.
A Buying Opportunity Amid the Selloff?
Despite the market downturn, some investors believe this could be a good opportunity to find undervalued stocks. Veteran emerging-market investor Mark Mobius remains optimistic, stating that while there are “no clear signs of bottoming, it is a great time to look for bargains.” He added that the Indian market will recover in due time, and his firm continues to hold its investments.
One positive sign is that selling pressure from company founders and employees has reduced significantly. Data from Nuvama Wealth Management Ltd. shows that these insiders have sold only 4.9 billion rupees ($56.4 million) this quarter, compared to an average of 114.3 billion rupees over the past eight quarters. This slowdown in insider selling could help stabilize the market.
What Lies Ahead?
While India’s long-term growth story remains intact, the short-term outlook appears challenging. Investors will be looking for sustained evidence of economic recovery, improved corporate earnings, and stronger consumer spending before they regain confidence in Indian equities. Until then, the market may continue to struggle with volatility and investor pessimism.