Why are Indian stock markets experiencing a sharp decline in early 2026?

Indian stock markets are experiencing a sharp decline primarily due to rising geopolitical tensions and negative investor sentiment, which has led to a sell-off despite strong economic fundamentals.

What is Nimesh Chandan's view on India's economic fundamentals?

Nimesh Chandan believes India's economic cycle is in a strong position, supported by improving business and profit cycles, a favorable credit environment, and higher liquidity, with sentiment being the missing factor.

Could a trade agreement with Europe boost Indian markets?

Yes, a potential India-Europe trade agreement is seen as a significant positive catalyst that could improve market sentiment, especially at a time of excessive pessimism, potentially leading to a market re-rating.

Home / Business and Economy / India Stocks Plunge Amid Geopolitical Fears

India Stocks Plunge Amid Geopolitical Fears

10 Jan

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Summary

Indian equities saw their sharpest weekly fall in four months.
Investor wealth dropped by over ₹15 lakh crore.
Improved economic cycle contrasts with current sentiment dip.

India Stocks Plunge Amid Geopolitical Fears

Indian stock markets have seen a significant downturn, marking their sharpest weekly decline in four months and erasing over ₹15 lakh crore in investor wealth. This slump is attributed to rising geopolitical tensions and a prevailing negative market sentiment, rather than a deterioration of India's economic fundamentals. The country's economic cycle is considered to be in a stronger position than at previous peaks.

Despite the market's reaction, experts suggest that investors are cutting valuation multiples due to uncertainty, not fundamental weaknesses. While progress on an India-US trade deal has been slower than anticipated, its actual economic impact is estimated to be minor, affecting less than 0.5% of India's GDP. A potential India-Europe trade agreement is viewed as a larger, underappreciated positive catalyst.

Sectors like telecom show promise due to improving industry structures and growth potential. However, caution remains for the IT sector due to geopolitical uncertainties and weak growth visibility. Fund managers believe a turnaround in sentiment, potentially driven by trade developments or policy signals, could trigger a market re-rating even without earnings upgrades, leading to stronger capital inflows.