Indian markets struggled in 2025-26 amid persistent foreign selling, a weaker rupee, and disappointing earnings growth, but domestic demand underpinned economic resilience despite global uncertainties.
Indian markets came under pressure in 2025-26 as foreign portfolio investors kept selling, the rupee weakened and earnings growth disappointed, according to the material provided. The Nifty 50 and wider benchmarks fell by about 14% in dollar terms over the period, with the Middle East conflict adding to already fragile sentiment.
At the same time, domestic institutions helped soften the blow. Strong inflows from mutual funds and other local investors offered a counterweight to foreign selling, while the Securities and Exchange Board of India said the economy remained broadly resilient on the back of domestic demand, government capital spending and the services sector.
The broader macroeconomic picture was not weak. Real GDP growth was estimated at 7.7% in 2025-26, up from 7.1% the previous year, while private consumption and investment accounted for 56.7% and 31.9% of nominal GDP, respectively. That suggests internal demand continued to do much of the heavy lifting even as overseas investors stepped back.
Other reports pointed to a clear split in foreign flows. Business Standard said FPIs withdrew a net ₹1.37 trillion from equities in FY26 but still put ₹13,964 crore into debt, helped by attractive domestic yields despite a Reserve Bank of India easing cycle and a weaker rupee. The Economic Survey, as reported by The Times of India, also flagged a net outflow of $3.9 billion by December 2025, with capital increasingly moving towards AI-led markets such as the US, Taiwan and Korea.
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