Hello, this is Priyanka Salve writing from Singapore.
Welcome to the latest edition of Inside India. A one-stop-shop for the stories and developments of the world’s fastest growing large economy.
Indian markets have been roiled by the Iran war, with foreign investors fleeing and valuations plummeting to unprecedented lows. But fund managers said low prices alone would not lure investors back.
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big story
For months, trade tensions with the United States were said to be the biggest sticking point for Indian stocks. Foreign investors poured nearly $2.5 billion into Indian stocks after the two countries agreed to a trade deal in February. But a month later, the market completely reversed course.
India’s benchmark Nifty 50 fell more than 10% in March, its worst monthly decline on record, as foreign investors sold more than $12 billion in stocks.
The index currently trades at a price-to-earnings ratio of 19.6 times, a level rarely seen in the past decade. India’s benchmark valuation has been this low only twice in the past decade: in 2020 at the beginning of the coronavirus pandemic and in 2022 at the beginning of the Russia-Ukraine war.
So I asked fund managers whether the Indian market is oversold and whether this near-historically low valuation could be a good point to invest in the fabled ‘India growth story’.
Commuters cross the road in the rain on March 31, 2026 in New Delhi, India.
Sanjeev Verma | Hindustan Times | Getty Images
Indian economy under stress
Escalating conflicts in the Middle East have made it clear that India is “structurally at risk,” said Pramod Gubbi, co-founder of portfolio management firm Marcellus Investment Managers. If the war is not resolved quickly and oil prices remain high, India’s fiscal deficit, inflation and currency will all come under pressure, which will “impact demand and revenue,” he said.
Gubbi added that India’s revenue growth has been weak for over a year and the current conflict will make it worse.
Some of his concerns echo those raised by India’s Chief Economic Adviser V. Anantha Nageswaran in a report released on March 28.
The world’s fastest-growing economy is forecast to grow between 7.0% and 7.4% in the fiscal year ending March 2027, but faces “substantial downside” risks due to rising energy costs and supply chain disruptions related to the Iran war, Nageswaran warned. He also expects the trade deficit to “increase significantly”, leading to “a widening of the current account deficit”.
In response to these pressures, the Indian government introduced two important interventions last week. The first was aimed at curbing the fall in the rupee by limiting the currency hedging positions that banks could take. The second was to reduce excise taxes on gasoline and diesel to prevent retail fuel prices from rising, which could exacerbate inflation.
While the rupee has strengthened thanks to currency restraint, Kotak Mahindra Asset Management Singapore chief executive and director Nitin Jain argued that keeping fuel prices artificially low “even by a quarter” could hurt government spending on “productive” activities such as capital spending.
In a note on Monday, Nomura estimated that cutting excise duty by 10 rupees per liter could have a total annual fiscal impact of 1.65 trillion rupees ($17.6 billion). “Increased subsidy requirements (fertilizers and fuel) and potential revenue shortfalls could widen the fiscal deficit, highlighting the need for spending prioritization,” Nageswaran said.
Diverting funds from productive capital investment to subsidies would send a wrong signal to foreign investors, Jain added.
declining growth
Some of these issues are having a major impact on the Indian market, but could be temporary if the Iran war ends soon. A more persistent concern about India is the lack of strong revenue growth.
Indian brokerage firm Ambit Capital said in a report shared with CNBC that the decline in profits reported from April to December 2025 is “the largest in four years.” The company said foreign investors will now focus on “earnings reliability” and lower valuations alone will not convince them to come back.
Experts said the Indian market has sustained a valuation premium for a long time as companies have grown rapidly on the back of rising disposable income, job creation and soaring consumption, adding that there is growing concern among investors about this narrative.
However, net foreign direct investment in Indian companies is currently languishing between $1 billion and $2 billion, according to data shared by Indian ratings and research firm Care Ratings on Tuesday. India’s net FDI flows as a percentage of GDP are also significantly lower than Brazil and Vietnam, according to World Bank data.
Experts say multinationals and foreign investors still want to be part of India’s consumption story, but the country’s inability to create more white-collar jobs is hurting that story. A report released in mid-March by India’s Azim University found that only a small percentage of graduates secure “secure, well-paying jobs within a year of graduation.”
Consumption is a key driver of India’s economy and a key factor in attracting foreign investment, but “if there are no jobs, there is no consumption,” says Marcellus’ Gabi.
need to know
Indian telecom giant Bharti Airtel raises $1 billion from private equity firm for data center division
Airtel’s data center arm, Nxtra Data, will receive $435 million from Florida-based Alpha Wave Global, $240 million from existing investors Carlyle, based in Washington, and $35 million from New York City’s Anchorage Capital.
Indigo names industry veteran William Walsh as new CEO
Mr. Walsh, 64, currently serves as executive director of the International Air Transport Association and is scheduled to join the Indian airline in early August. Mr. Walsh previously served as CEO of British Airways.
India takes ‘big hit’ to tax revenue to prevent fuel price hike during Iran war
The Indian government has cut the central excise duty on petrol and diesel for domestic consumption by 10 rupees ($0.11) per liter each to prevent a rise in pump prices due to disruptions to global energy supplies caused by the Iran war. Petroleum and Natural Gas Minister Hardeep Singh Puri said this would be a “huge blow” to the government’s tax revenue.
very soon
April 6th: HSBC composite PMI final value for March
April 8: RBI Monetary Policy Meeting
