India's stock market party is on pause. The local NSE Nifty 50 index is off 8% since a September record amid concerns about a slowing economy and toppy valuations, says Bloomberg. GDP is growing at an annual pace of 5.4%, but that is soft by recent standards.
Inflation and a weak jobs market are taking their toll on India’s 500 million-strong urban population. Consumer goods companies report that the middle classes are cutting spending on everything from cars to soap. Foreign investors pulled a record amount of money out of equities in October, with further net withdrawals in November.
Why India's stock market has thrown investors into a frenzy
The market increasingly rests on domestic savers, says The Economist. Five years ago, just one in 14 Indian households held shares; today it is one in five. India hosted 258 initial public offerings (IPOs) – 30% of the global total by number – in the first three quarters of 2025.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
There is much to celebrate in the country’s “astonishing stock market revolution”, but there are also risks. “Most Indian speculators will never have experienced a downturn”, leaving them dangerously exposed “when one arrives”.
Foreign fund managers are worried about an investment bubble, says Craig Mellow in Barron’s. IPOs are being “advertised on billboards”, while cricket stars hawk “mutual funds”. Still, with “more than 5,000 stocks on offer”, there are “pockets of value” to be found in India for those who do their research.
Some of the frenzy over Indian shares has come from the narrative that the country is “the next China”, says Arthur Budaghyan of BCA Research. This is an oversimplification, he warns. Repeated failure to pass rural land reform will hinder the sort of “breakneck urbanisation that drove China’s period of super-growth”. There is “a blue sky” ahead, “but they may have to go through some storms first”.
During a four-year rally, the Nifty index has more than tripled, says Lex in the Financial Times. More than $35billion in net foreign capital has flowed into Indian stocks over the same period. But on nearly four times book value, compared with an emerging markets average of less than two, Nifty valuations are looking stretched.
India-focused UK funds have been popular with investors over the past year, even as their China-focused peers suffered “consistent outflows”, says Dave Baxter in the Investors’ Chronicle. The fundamental case for India remains compelling: “strong demographics”, a “growing middle class” and a “business-friendly government”.
But further gains depend on continued good news. India “has been a fantastic growth market”, says Rob Morgan of Charles Stanley. But its record is punctuated with some big drops, usually when valuations got ahead of themselves and “sentiment suddenly turned sour”.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Number of high-earning women jumps 12% – how to convert income into pensionsMore women than ever are paying the highest rate of tax as record numbers succeed in high paying professional roles. But their pension saving still needs to catch up
-
Yoshiaki Murakami: Japan’s original corporate raiderThe originator of Japanese activism, Yoshiaki Murakami, was disgraced by an insider-trading scandal in 2006. Now, he's back, shaking things up
-
Yoshiaki Murakami: Japan’s original corporate raider
The originator of Japanese activism, Yoshiaki Murakami, was disgraced by an insider-trading scandal in 2006. Now, he's back, shaking things up
-
How much gold does China have – and how to cash inChina's gold reserves are vastly understated, says Dominic Frisby. So hold gold, overbought or not
-
Europe’s new single stock market is no panaceaOpinion It is hard to see how a single European stock exchange will fix anything. Friedrich Merz is trying his hand at a failed strategy, says Matthew Lynn
-
Who is Rob Granieri, the mysterious billionaire leader of Jane Street?Profits at Jane Street have exploded, throwing billionaire Rob Granieri into the limelight. But it’s not just the firm’s success that is prompting scrutiny
-
Emerging markets boast top-quality growth stocks at bargain pricesOpinion Lim Wen Loong, investment director at Ashoka WhiteOak Capital, selects three growth stocks where he’d put his money
-
New faces don’t solve old problems – why strategy also matters when it comes to investment trustsOpinion Changing managers often fails to boost a trust’s performance, says Max King
-
'Investors should back the AI maximalists'Polar Capital is bullish on AI and believe that the sector is far from being a bubble
-
Global investors have overlooked some of China’s best growth stocksOpinion Dale Nicholls, portfolio manager, Fidelity China Special Situations, highlights three Chinese businesses where he’d put his money
