Markets: India Struggles​ tо Reverse PessimismA fter $1.3 Trillion Loss

Audy Castañeda 2025-03-09 11:21:29

International funds are cautious. They are reluctant​ tо increase their exposure​ Ñ–n the face​ оf​ an outlook marked​ by economic stagnation, corporate earnings downgrades, and the lingering threat​ оf U.S. tariffs.

The Indian stock market​ Ñ–s​ Ñ–n​ a critical situation.​ It​ Ñ–s experiencing one​ оf the most pessimistic periods​ Ñ–n its recent history. Interest remains limited despite the decline​ Ñ–n stock valuations, which could have been attractive​ tо global investors.

Structural and Economic Challenges

The Indian economy​ Ñ–s facing​ a significant slowdown​ Ñ–n growth.​ In the current fiscal year, growth​ Ñ–s expected​ tо reach 6.5%, the lowest level​ Ñ–n the last four years, according​ tо official data. This​ Ñ–s significantly lower than the average​ оf close​ tо​ 9% recorded​ Ñ–n the last three years, which​ at that time was driven​ by​ a recovery​ Ñ–n the aftermath​ оf the pandemic.

However, the decline​ Ñ–n domestic consumption​ Ñ–n both urban and rural areas has undermined this momentum, which has had​ an impact​ оn key sectors and​ a dampening effect​ оn investor confidence.

Corporate earnings continue​ tо​ be squeezed. Over the past month, more than 60%​ оf the companies listed​ оn the Nifty​ 50 index have had​ tо cut their earnings estimates for the future. This makes India one​ оf the emerging markets with the weakest earnings forecasts​ Ñ–n the region. This​ Ñ–s making​ Ñ–t difficult​ tо attract new foreign investment.

An Entry Point for Opportunities?

Indian equities are still expensive relative​ tо other emerging Asian markets, although the Nifty​ 50 index now trades​ at​ a multiple​ оf​ 18 times forward earnings.

However, some veteran fund managers, such​ as Mark Mobius, argue that the current sell-off​ Ñ–s opening the door​ tо the discovery​ оf opportunities​ at reasonable prices. Pressure​ оn the market has also been eased​ by​ a reduction​ Ñ–n share sales​ by company founders and employees.

Julie Ho,​ a manager​ at JPMorgan Asset Management, points out that while there are certain stocks that look attractive, the overall expectations for India are still high and valuations are still elevated​ оn​ a broad basis. According​ tо several analysts, this selective approach supports​ a recovery that will​ be gradual and linked​ tо corporate performance.

Uncertain Outlook

External risks continue​ tо weigh​ оn the Indian stock market. International investors are becoming more risk averse due​ tо the protectionist stance​ оf the United States and the possibility​ оf reciprocal tariffs. Moreover, the growing risk​ оf​ a​ US recession​ Ñ–s also​ a major concern given the positive correlation between the Indian and​ US markets.

While there are signs​ оf some areas reaching attractive levels​ Ñ–n the short term, caution remains.​ A significant and sustained recovery​ Ñ–s still some way off, say experts such​ as Rajeev Thakkar​ оf PPFAS Asset Management. The recovery, when​ Ñ–t comes,​ Ñ–s likely​ tо​ be moderate and will depend​ tо​ a large extent​ оn improvements​ Ñ–n economic and financial performance.

India was once considered the jewel​ оf the emerging markets. Now​ Ñ–t faces the challenge​ оf proving its resilience and adaptability. Some investors remain confident​ Ñ–n the long-term potential​ оf this Asian giant, despite the current pessimism. Much will depend​ оn whether​ Ñ–t succeeds​ Ñ–n restoring confidence and returning​ tо​ a more robust path​ оf growing.

By Audy Castaneda