Howdy, that is Priyanka Salve, writing to you from Singapore.
Welcome to the newest version of “Inside India“ — your one-stop vacation spot for tales and developments from the world’s quickest rising massive economic system.
Indian markets have been rattled by the Iran struggle, with overseas traders fleeing and valuations slipping to uncommon lows. However fund managers inform me that low costs by themselves will not lure traders again.
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The large story
For months, commerce tensions with the U.S. had been dubbed the largest overhang on Indian equities. When the 2 nations agreed on a commerce pact in February, overseas traders poured practically $2.5 billion into Indian shares. However a month later, the market has fully reversed course.
India’s benchmark Nifty 50 fell greater than 10% in March, as overseas traders offered over $12 billion in equities — the worst month-to-month sell-off on file.
The index now trades at a price-to-earnings ratio of 19.6 occasions, a degree hardly ever seen over the previous decade. The one two events prior to now ten years when Indian benchmark valuations dipped this low had been in the course of the early months of the Covid‑19 outbreak in 2020 and the Russia‑Ukraine struggle in 2022.
So, I requested fund managers whether or not Indian markets are oversold — and whether or not these near-historically low valuations might be a very good level to spend money on the fabled “India development story.”
A commuter cross a street within the rain on March 31, 2026 in New Delhi, India.
Sanjeev Verma | Hindustan Occasions | Getty Photos
Indian economic system underneath stress
The escalating battle within the Center East has revealed that India “is structurally uncovered,” Pramod Gubbi, co-founder of portfolio administration agency Marcellus Funding Managers, instructed me. If there isn’t a fast decision to the struggle and oil costs stay elevated, India’s fiscal deficit, inflation, and foreign money will all come underneath strain — which in flip will “have an effect on demand and earnings,” he mentioned.
Gubbi added that earnings development in India has been weak for greater than a yr, and the present battle will exacerbate it.
A few of his considerations echo these raised by India’s Chief Financial Advisor V. Anantha Nageswaran in a report printed March 28.
The world’s fastest-growing economic system’s forecast of seven.0%–7.4% development for the monetary yr ending March 2027 faces “appreciable draw back” danger as a result of rising vitality prices and provide‑chain disruptions linked to the Iran struggle, Nageswaran warned. He additionally expects the commerce deficit to “rise considerably” and result in a “widening [of] the present account deficit.”
In response to those pressures, the Indian authorities launched two key interventions final week. The primary aimed to curb the falling rupee by limiting foreign money‑hedging positions that banks can take. The second was an excise obligation reduce on petrol and diesel to stop a spike in retail gasoline costs that might worsen inflation.
Whereas the rupee has strengthened because of the foreign money curbs, Nitin Jain, chief govt and director of Kotak Mahindra Asset Administration Singapore, argued that conserving gasoline costs artificially low for “even 1 / 4” might harm authorities spending on “productive” actions like capex.
Nomura in a observe Monday estimated {that a} 10‑rupee‑per‑litre excise reduce might have a complete annual fiscal impression of 1.65 trillion rupees ($17.6 billion). “Greater subsidy necessities [fertilizer and fuel] and potential income shortfalls might widen the fiscal deficit, underscoring the necessity for expenditure prioritization,” Nageswaran mentioned.
Such diversion of funds away from productive capex towards subsidies sends the unsuitable sign to overseas traders, Jain added.
Fading development
Whereas a few of these points are a major overhang on the Indian markets, they might be transient if the Iran struggle ends sooner quite than later. The extra cussed fear with India is the dearth of robust earnings development.
Earnings cuts reported between April and December 2025 “are the most important seen prior to now 4 years,” famous Indian brokerage Ambit Capital in a report shared with CNBC. Overseas traders, it mentioned, will now focus “on earnings credibility,” and decrease valuations alone is not going to persuade them to return.
Indian markets have lengthy commanded a valuation premium as a result of companies grew quickly, supported by rising disposable incomes, job creation, and a consumption surge, consultants mentioned, including that there are rising considerations amongst traders about this narrative.
However right this moment, web abroad direct funding into Indian companies is languishing between $1 billion and $2 billion, in response to information shared by Indian scores and analysis agency Care Scores on Tuesday. India’s web FDI flows as a share of GDP are additionally considerably decrease than these of Brazil and Vietnam, World Financial institution information exhibits.
Consultants say multinationals and overseas traders nonetheless need a share of India’s consumption story — however the nation’s incapacity to create extra white-collar jobs is undermining that narrative. In response to a report by India’s Azim College in mid-March, solely a small share of graduates are securing “steady salaried jobs inside a yr of commencement.”
Consumption is a serious driver of India’s economic system and a key magnet for overseas funding, however “with out jobs, there will not be consumption,” mentioned Gubbi of Marcellus.
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Developing
April 6: HSBC Composite last PMI for March
April 8: RBI’s financial coverage assembly
