India’s market outlook stays buoyed by domestic strength despite global headwinds

In its annual assessment, the Securities and Exchange Board of India noted that India’s economy entered 2026-27 with solid internal fundamentals, including strong consumer spending and government capital projects that lifted real GDP growth to an estimated 7.7% in 2025-26. Despite this resilience, equity markets fell about 14% in dollar terms, driven by record foreign portfolio outflows of $19.7 billion, a weaker rupee and valuation concerns.

Domestic institutional investors, especially mutual funds, helped cushion the decline. The regulator flagged ongoing Middle East hostilities and oil prices above $100 per barrel as key risks that could expand the current-account deficit and raise inflation. It recommended continued use of strategic reserves, import diversification and targeted fiscal support to preserve macro-stability. A resolution of the regional conflict and normalised energy prices are seen as the main catalysts for a rebound in foreign capital flows.