Indian equities, particularly the Nifty 50, have significantly underperformed their Asian and global counterparts over the past year, with the index down 10.6 per cent. This lag is attributed to factors like rising global oil prices, rupee depreciation, and a lack of participation in the global chipmaker rally that boosted markets like South Korea and Taiwan.
The Indian IPO market recorded its highest monthly fundraising in September, with 34 mainboard companies raising 39,309 crore, despite a significant decline in the Nifty 50 index.
Rising bond yields in the US and other advanced economies are making it increasingly difficult for Indian equities to attract foreign portfolio investors (FPIs), leading to pressure on valuations and potentially lower returns for domestic investors.
Newly listed companies Vedanta Aluminium Metal, SBI Funds Management and Manipal Health Enterprises have entered the Rs 1 trillion mcap list since March 2026.
Tempsens Instruments India has emerged as the strongest mainboard IPO debutant of calendar year 2026 so far, delivering a 95.55 per cent gain on its listing day, surpassing all previous top performers and contributing to August being the strongest month for listing gains this year.
'Banking is the only sector that can see double-digit growth in FY27.'
IT stocks had their worst first half fall in decades, with the Nifty IT index declining 31% in the January-June 2026 period, its biggest decline in the first six months of a calendar year since 2003.
India's consumption stocks, which have outperformed the broader market, are now facing significant pressure due to a gradual rise in fuel prices and the potential for higher inflation. Analysts warn that companies may be forced to pass on increased input costs to consumers, potentially hurting demand across both staples and discretionary categories, with a looming threat of deficient monsoon rainfall further exacerbating inflationary concerns.
The Bank Nifty is currently trading at a 43.5 per cent discount to the Nifty 50, near its widest gap since 2015, reflecting investor pessimism despite the banking sector's strong earnings growth.
India's top 16 IT services companies distributed a record 1.3 trillion to shareholders in FY26 through dividends and share buybacks, a 36.3 per cent increase from FY25, even as the industry grappled with AI-driven business model threats and a significant decline in market capitalisation.
India's aviation sector is facing fresh turbulence, with rising fuel costs, the Ministry of Civil Aviation's free-seat directive, and geopolitical disruptions in West Asia clouding near-term earnings visibility.
Companies in the fast-moving consumer goods (FMCG) sector are losing favour with equity investors, with their price-to-earnings (P/E) ratio declining to its lowest level in six years, now trading at 38.8 times trailing earnings.
Despite geopolitical tensions and FII outflows, Indian small and midcap stocks have not only recovered losses but are also outperforming largecap indices, driven by attractive valuations, domestic institutional support, and a rebound in earnings.
FPIs net sold equities worth Rs 1.7 trillion in 2025 -- the highest annual net sale on record.
Investing in gold trumped most other asset classes in terms of compounded annualised returns over the long term, suggests a report by FundsIndia.
Fixed deposits from nationalised banks delivered higher returns than equities, outperforming both inflation and stock market benchmarks.
Over 50 per cent, or 660 stocks, from the BSE 1000 index recorded negative returns during CY25.
Stocks of fast-moving consumer goods companies have taken it on the chin in calendar year 2026 (CY26) with the Nifty FMCG index falling over 6 per cent compared to the Nifty 50 dipping 0.8 per cent. Nifty FMCG is one of the worst-performing sectors on the NSE in CY26.
Analysts warn that global markets are significantly underpricing the risk of an oil price shock, with Brent crude potentially soaring to $150 per barrel if the West Asia conflict escalates or damages critical oil and gas infrastructure. This could lead to severe inflation and economic repercussions, particularly for import-dependent nations like India.
Unless the primary market momentum slows, smallcap stocks will stay subdued.
The strong domestic flow offset selling by foreign portfolio investors who pulled out $23.3 billion (Rs 2.03 trillion) from domestic equity markets in CY25.
The Reserve Bank of India (RBI) on Friday delivered a 25 basis point (bps) repo rate cut analysts expected, driven by the strong 8.2 per cent GDP growth in the September quarter. However, analysts do not expect a runaway market rally as the impact of US tariffs continues.
The BSE Sensex and the Nifty 50 declined around 4.5 per cent each since the start of the West Asia conflict.
'The net inflows into MF schemes may also have been lower last month, with investors booking profit and taking a more measured approach amid elevated valuations.'
Global funds' assets under custody (AUC) in India have been flat this year, with a Rs 2 trillion drop in information technology (IT) holdings offset by gains in financial stocks. AUC is the total market value of equities held by FPIs.
Foreign portfolio investors sold stocks worth Rs 1.42 trillion in 2025, with their sales hitting Rs 12,257 crore in the first four trading days of September.
'I expect IT stocks to trade lower for some time. They are unlikely to make money for investors.'
So far this year, the rupee has fallen by 4.2 per cent, the worst among its Asian peers.
Concerns over weakening demand for Indian pharmaceutical (pharma) drugs in the US - their largest export market - have weighed heavily on investor sentiment this year. While the Nifty 50 has gained 6.02 per cent year - to - date (as on September 15), the Nifty Pharma index has declined 5.18 per cent, National Stock Exchange data shows.
The BSE Smallcap index hit an over eight-month low of 47,627.96, falling 3 per cent in Tuesday's intraday trade amid selling pressure due to ongoing tariff-related concerns and rising geopolitical tensions.
The sector's IPO pipeline is led by Tata Capital's Rs 17,000 crore issue, followed by ICICI Prudential Asset Management at Rs 10,200 crore and Billionbrains Garage Ventures at Rs 6,000 crore.
Life Insurance Corporation (LIC) , the country's largest domestic institutional investor (DII), has seen a Rs 46,000 crore erosion in the value of its equity holdings amid market downturns in July. The benchmark indices, Nifty 50 and BSE Sensex, have slipped 2.6 per cent from their June 2025-end level to 24,837 and 81,463.09 respectively.
Shares of Reliance Industries Limited (RIL) tumbled on Tuesday, posting its biggest single-day decline in 19 months, amid controversy over its purchase of Russian oil and profit-booking after recent gains.
As the rally in precious metals takes centre stage in 2025, most analysts recommend a larger allocation to gold over silver despite the latter's outperformance this year. In the current calendar year (CY25), spot gold prices in dollar terms rallied
The surge in the market price is also attributed to demand by retail and high-networth individual investors ahead of the IPO.
'If the US stagnates and falls into a recession, the dollar will weaken, oil prices will also dip. This augurs well for India.'
Analysts expect Nifty to rise up by to 6 per cent in six months, with intermittent corrections likely due to global factors.
Brent crude oil prices can touch $150 a barrel (bbl) - up a whopping 103 per cent from the current levels - in the worst-case scenario if the Israel-Iran geopolitical tensions escalate, suggest analysts.
The sharp pullback in mid and smallcap stocks signals a cooling-off period in segments that previously attracted considerable investor interest.
On average, stocks that debuted last year are down 37 per cent from their peak levels.
