The worst might not be over
Hello, this is Priyanka Salve, writing to you from Singapore.
Welcome to the latest edition of “Inside India“ — your one-stop destination for stories and developments from the world’s fastest growing large economy.
Indian markets have been rattled by the Iran war, with foreign investors fleeing and valuations slipping to rare lows. But fund managers tell me that low prices by themselves won’t lure investors back.
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The big story
For months, trade tensions with the U.S. were dubbed the biggest overhang on Indian equities. When the two countries agreed on a trade pact in February, foreign investors poured nearly $2.5 billion into Indian stocks. But a month later, the market has completely reversed course.
India’s benchmark Nifty 50 fell more than 10% in March, as foreign investors sold over $12 billion in equities — the worst monthly sell-off on record.
The index now trades at a price-to-earnings ratio of 19.6 times, a level rarely seen over the past decade. The only two occasions in the past ten years when Indian benchmark valuations dipped this low were during the early months of the Covid‑19 outbreak in 2020 and the Russia‑Ukraine war in 2022.
So, I asked fund managers whether Indian markets are oversold — and whether these near-historically low valuations could be a good point to invest in the fabled “India growth story.”
A commuter cross a road in the rain on March 31, 2026 in New Delhi, India.
Sanjeev Verma | Hindustan Times | Getty Images
Indian economy under stress
The escalating conflict in the Middle East has revealed that India “is structurally exposed,” Pramod Gubbi, co-founder of portfolio management firm Marcellus Investment Managers, told me. If there is no quick resolution to the war and oil prices remain elevated, India’s fiscal deficit, inflation, and currency will all come under pressure — which in turn will “affect demand and earnings,” he said.
Gubbi added that earnings growth in India has been weak for more than a year, and the current conflict will exacerbate it.
Some of his concerns echo those raised by India’s Chief Economic Advisor V. Anantha Nageswaran in a report published March 28.
The world’s fastest-growing economy’s forecast of 7.0%–7.4% growth for the financial year ending March 2027 faces “considerable downside” risk due to rising energy costs and supply‑chain disruptions linked to the Iran war, Nageswaran warned. He also expects the trade deficit to “rise significantly” and lead to a “widening [of] the current account deficit.”
In response to these pressures, the Indian government introduced two key interventions last week. The first aimed to curb the falling rupee by limiting currency‑hedging positions that banks can take. The second was an excise duty cut on petrol and diesel to prevent a spike in retail fuel prices that could worsen inflation.
While the rupee has strengthened thanks to the currency curbs, Nitin Jain, chief…
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