Indian shares are down more than 7.0% this year and are on track for their weakest annual performance in more than a decade, a stark outlier in a region where Japan, South Korea and Taiwan have posted solid gains.
While AI optimism has boosted some technology-heavy Asian markets, investors have also found value in Thailand, Malaysia and the Philippines.
The Nifty 50 was forecast to rise around 5.0% from Tuesday’s close of 24,334.55 to 25,556 by end-2026, according to an August 13-26 Reuters poll of 28 equity analysts.
It was then expected to rise to 26,300 by mid-2027 and 27,450 by end-2027. The BSE Sensex was predicted to reach 81,608 by end-2026, 85,700 by mid-2027 and 89,000 by end-2027.
These were the lowest median forecasts since polling began for the end-2026 and mid-2027 levels last year.
The modest outlook comes despite official data showing India’s economy grew just short of 8% in previous fiscal years and Nifty 50 companies reporting 18% profit growth in the June quarter, the fastest in 10 quarters.
“When the entire world is doing well and India is not, that tells me rosy economic data that looks good on paper is actually not that rosy,” Anil Manghnani, director at Modern Shares and Stockbrokers, said.
“And yes, it’s an AI story, and India has lagged because we don’t have exposure. India now is at the bottom in Asia from an investment perspective … So that’s telling you what the world is thinking.”
Overseas investors sold roughly 2.4 trillion rupees ($25.1 billion) of Indian shares this year, preferring cheaper or more AI-exposed opportunities elsewhere in Asia.
The outflows have pummelled the rupee, making it one of Asia’s worst-performing currencies. The currency’s 6% fall against the dollar this year and elevated crude oil prices — trading near $90 per barrel — are turning away overseas investors.
A weaker rupee erodes dollar returns, further dampening foreign interest. “Oil prices and the rupee continue to be immediate risks for Indian markets,” TS Harihar, chief executive and founder of HRBV Client Solutions, said.
More than 70% of analysts who answered an additional question, 20 of 27, said a correction — a decline of 10% or more – in Indian stocks was unlikely in the next three months. Seven said a correction was likely.
But some analysts remained optimistic.
“Earnings will continue to see an improvement from previous years,” Yogesh Kalinge, associate director of research at A.K. Capital Services, said.
“Even if we assume baseline earnings growth for 2027, it is not difficult to breach the all-time high.”
Meanwhile, domestic investors have stepped in to support the market as foreign investors shun Indian equities. Systematic investment plans contributed over 319.61 billion rupees in July, more than tenfold the amount of a decade ago, helping prevent a sharper decline.
