Indian Stocks Tread Cautiously Amid Global Headwinds and Earnings Slowdown

As of August 21, 2025, India's stock markets have faced significant headwinds, with the blue-chip Nifty 50 index rising just 5.2% so far this year, lagging the broader Asian and emerging markets. This underperformance is largely attributed to the impact of US tariffs and a substantial outflow of foreign investment.

Foreign investors have sold more than $13 billion worth of Indian stocks this year, including around $2.4 billion in the first half of August, after US President Donald Trump raised tariffs on Indian exports to 50%. This has put significant pressure on the Indian markets, which are now forecast to manage only modest gains by the end of 2025.

According to a Reuters poll of equity analysts, the Nifty 50 is expected to rise about 3.9% to 25,834 by the end of this year, before reaching 26,500 by mid-2026 and 27,950 by the end of 2026. The BSE Sensex is also projected to climb to 85,100 this year, 86,875 by mid-2026, and 91,370 by the end of 2026. This represents a delay in the markets' recovery, with a new record high now not anticipated until 2026.

Analysts attribute this cautious outlook to a combination of factors, including weak economic data, ongoing tariff uncertainty, and tepid earnings growth. India's listed companies have reported only single-digit profit growth for five straight quarters, a sharp slowdown from the 15-25% expansion recorded between 2020-21 and 2023-24. This has made foreign investors wary of returning to the market, as they await more robust signs of economic and corporate performance.

Despite India's status as the world's fastest-growing major economy, expected to expand 6.4% this fiscal year, the country's equity markets have struggled to maintain their momentum. Analysts warn that until foreign investors regain confidence in the Indian economy and earnings, the markets are unlikely to see a substantial rise from current levels.