Indian equities have significantly underperformed global markets in recent periods, with India's Nifty 50 TRI delivering a negative return of 0.4% over the past year as of June 30, 2026, according to data from Kotak Securities and Bloomberg cited by Abakkus Investment Managers. This contrasts sharply with other major markets, where South Korea's Kospi returned 103.2%, Taiwan's TAIEX 83.2%, Japan's Nikkei 56.7%, and the US Nasdaq 20.1% during the same period. However, recent one-month performance shows a different trend, with India's Nifty 50 TRI making a positive return of 2.4% while South Korea's Kospi registered a negative return of 22.2% in the same period. As reported by Abakkus Investment Managers, this underperformance has been largely driven by investor sentiment and valuation concerns rather than deterioration in India's economic fundamentals. Indian equities ended July with a 2.2% gain, despite volatility arising from geopolitical tensions, crude oil movements and corporate earnings. The broader market also performed well, with Midcap Index up 1.8% and Smallcap Index up 2.5% for the month.
The Securities and Exchange Board of India (SEBI) reports that India's financial markets are likely to remain supported by resilient domestic economic fundamentals in 2026-27, despite facing challenges from global uncertainty. According to SEBI's Annual Report 2025-26, India's economy remained resilient during 2025-26 with real GDP growth estimated at 7.7%, accelerating from 7.1% in the previous year. The report highlights that private consumption and investment remained important growth drivers, accounting for 56.7% and 31.9% of nominal GDP, respectively. Looking ahead, the IMF projects 6.5% growth for India in 2026-27, compared with global growth of 3.1%, supported by India's relatively strong domestic fundamentals and fiscal consolidation. However, SEBI notes that heightened geopolitical uncertainty, elevated commodity prices and volatile foreign capital flows could continue to pose challenges to market stability.
Jefferies research report highlighted that the more encouraging signal is coming from the domestic economy, with bank credit growth accelerating to 17-18 per cent year-on-year, the highest level in more than a decade. This robust domestic growth momentum, combined with improving capital flows, could provide significant support to Indian markets in the coming months. The research firm noted that India recorded net foreign buying of US$2.45 billion in equities in July, helped by an unwind of the memory trade. However, foreign investors remained net sellers of Indian equities to the tune of US$25.4 billion year-to-date, highlighting continued pressure from overseas flows despite the recent positive developments. India recorded $2.5 billion in FII inflows in July, while DII inflows remained positive at $3.7 billion, supported by steady SIP and insurance flows.
HSBC Mutual Fund's latest report indicates that India's investment cycle is expected to be on a medium-term uptrend driven by government infrastructure spending, manufacturing support and a pickup in private investments. The fund house noted that Nifty valuations are now in-line with the 10-year average, with the near-term outlook improving assuming no re-escalation of geopolitical conflicts. Corporate earnings recovery continues, with strong first-quarter FY27 results to date, while announcements of potential trade deals with the EU and the US should support exports. In equity markets, IT, real estate and automobiles were among the best-performing sectors during July, while healthcare also outperformed Nifty. However, metals, FMCG, infrastructure, banks, telecom underperformed Nifty, with utilities, energy and industrials being the worst performing sectors.
Despite near-term market underperformance and global capital flow challenges, Abakkus Investment Managers emphasizes that India's broader economic fundamentals remain resilient with domestic demand, infrastructure spending, consumption and policy continuity continuing to provide long-term support. The investment manager believes India's structural growth drivers, including robust domestic consumption, favourable demographics, infrastructure creation, improving formalisation of the economy and policy continuity, continue to support the country's long-term investment case. As noted by the fund house, India's economic fundamentals remain strong with robust growth, healthy forex reserves, improving domestic demand, and policy continuity, though global investors have shifted capital toward AI-led markets. India is expected to benefit over the medium to long term as global capital allocation evolves.
Aman Chowhan, Head of Equities – Alternates at Abakkus Investment Managers Private Limited, commented on the outlook, stating that "India's long-term investment case remains firmly intact. While global capital flows are currently being influenced by evolving technology-led opportunities, geopolitical developments and currency movements, the country's underlying growth drivers including demographics, consumption, formalisation and infrastructure creation continue to strengthen." The expert noted that "Periods of market underperformance often create the foundation for future opportunities," highlighting the importance of focusing on long-term fundamentals rather than short-term market performance. For retail investors, the current phase emphasizes the need to maintain a long-term perspective while monitoring global capital flow trends and India's structural advantages in consumption and demographics.
