Indian shares edged lower on Tuesday, following the benchmarks' six-week low hit in the previous session, as sentiment remained subdued due to the widening Middle East conflict pushing crude prices higher. The Nifty 50 lost 0.46% at 23,668.85 and the BSE Sensex fell 0.53% to 75,727.30 as of 10:06 a.m. IST. According to Reuters, rising crude prices and renewed US–Iran hostilities are keeping risk appetite subdued, with Brent crude futures rising 0.6% to around $98 per barrel. India is particularly vulnerable to higher fuel prices as it imports about 85% of its crude requirements, making the country sensitive to Middle East geopolitical developments.
India's economic momentum has strengthened significantly with GDP growth reaching 7.7% in FY26, revised slightly higher from the second estimate of 7.6%, marking the sharpest growth rate since FY2022. This performance has consolidated India as the fastest growing G20 country, demonstrating resilience despite multiple global headwinds including US tariffs, higher energy costs from reduced Russian oil imports, and Middle East war pressures that triggered rupee weakness and capital flight. The growth acceleration contrasts sharply with the government's initial projection of 6.3-6.8% growth range, with private expenditure accelerating to 7.7% from 5.8% in FY25 and gross fixed capital formation picking up to 7.1% from 7.3%. According to Morgan Stanley, this growth trajectory supports their view that India is in the midst of a multi-quarter growth upcycle, driven by improving investments, monetary policy support, and domestic demand recovery.
While the secondary market remained lacklustre, the primary market continued to see strong action, with 12 IPOs opening this week, aiming to raise a combined ₹70 billion in one of the busiest weeks of the current IPO cycle. As per Motilal Oswal Financial, state-owned Bharat Electronics (BAJE.NS) and Hindustan Aeronautics (HIAE.NS) added 2.3% and 3.7% respectively after India's defence acquisition council approved various proposals at an estimated cost of ₹1.1 trillion. However, twelve of the 16 major domestic sectors logged losses, with heavyweight financials (.NIFTYFIN) falling 0.7% and private banks (.NIFPVTBNK) sliding 0.6%. The three heaviest benchmark stocks, HDFC Bank (HDBK.NS), ICICI Bank (ICBK.NS) and Reliance Industries (RELI.NS) shed 0.7%, 1.1% and 0.6% respectively, while the broader small-caps (.NIFSMCP100) and mid-caps (.NIFMDCP100) fell 0.3% each.
However, prominent economists have raised serious concerns about the accuracy of India's GDP data, particularly questioning the methodology used by the government's statistical agency. Professor Arun Kumar from JNU, a retired professor of economics, argues that the 7.8% growth rate only represents the organised sector at best, which accounts for only 55% of GDP. He explains that the unorganised sector, representing 45% of GDP and 94% of the workforce, is not separately tracked and is proxied by organised sector data. Kumar contends that if the organised sector is growing at 7.8%, the actual growth rate would be closer to 3% - or potentially close to 0% if the projection methodology is flawed. The economist points out that during the West Asia crisis in April-May 2026, when crude oil and gas shortages caused severe supply disruptions, the data shows cooking gas prices rising from ₹1,200 to ₹4,000 in black markets, creating 30% inflation for workers earning ₹10,000-11,000. He argues that the crisis in the average person's life remains invisible in official data, as the methodology projects from the previous year to the current year using high-frequency data that primarily captures organised sector activity.
Morgan Stanley expects the Sensex to reach 89,000 by June 2027 in its base case scenario, with a 50% probability assigned to this target. The brokerage also assigns 25% probabilities to a bull-case target of 100,000 and a bear-case target of 66,000. In their base case, Morgan Stanley assumes continued gains in macroeconomic stability, higher private investment, and a positive gap between real growth and real interest rates. The brokerage expects Sensex earnings to compound at 16% annually through F2029, with earnings growth estimates for calendar 2026 (CY26) having risen to 9.5% from 7.8% as reported by CNBC TV18. As per Morgan Stanley, India is a defensive growth market with a major earnings cycle expected to unfold over coming quarters, supported by improving investments, monetary policy support, and an undervalued currency. Technical analysts suggest that Nifty could remain volatile around key support levels, while any recovery is likely to face selling at higher levels.
