Nearly two years after reaching its last record high, the Sensex remains stuck below its peak, highlighting a disconnect between domestic investor activity and global investor sentiment amid mounting macroeconomic pressures.
Nearly two years after the Sensex last set a record, India’s blue-chip benchmark is still stuck well below that watermark, exposing a disconnect between strong domestic savings flows and a market that has stopped rewarding buy-and-hold investors on the usual timetable. ETMarkets reported on 25 August that the index had gone 697 days without a fresh all-time high, while Candlle estimated it was trading around 77,300, about 10% below its peak near 86,000.
The striking part is not a collapse, but the persistence. JantaScope noted that the drought does not imply a continuous fall; the market has swung through rebounds, corrections and sideways patches without generating enough follow-through to break out. ETMarkets said 37% of Sensex trading days in 2026 had ended with negative two-year returns, the worst share since 2012, while 62.3% of sessions showed negative one-year returns, topping the 59% seen in 2012 and the 58.3% recorded in 2016.
That helps explain why global investors have cooled on India even as domestic mutual fund and retail money has remained active. According to a Bank of America fund-manager survey cited by ETMarkets and Money9 Live, India has replaced Indonesia as Asia’s least-preferred equity market and has held that distinction for the second time this year. Money9 Live said foreign institutional investors have pulled about US$60 billion from Indian shares since the September 2024 peak, including roughly US$30 billion in 2026 alone.
The headwinds are piling up rather than arriving in one dramatic shock. Money9 Live said traders were wrestling with elevated valuations, dearer crude and foreign selling, with Brent seen at US$92 to US$95 a barrel and a risk of topping US$100 if West Asia tensions worsen. Candlle added other pressures that matter for equity pricing: rupee weakness, a more hawkish Reserve Bank of India tone, a cut to the FY27 growth forecast to 6.8%, and narrowing market breadth beneath the headline move in smaller shares.
That narrowing matters because India’s rally has not vanished; it has become selective. In an interview with Business Today, market strategist Amit Goel said broader indices had repeatedly made new highs while the benchmark Nifty lagged because heavyweight constituents were not delivering the same earnings momentum. Goel said “The expected growth in EPS for this year is twenty percent plus” for small- and mid-cap companies, against “only about eight percent” for the Nifty, and he also pointed to persistent foreign selling and an IT sector still more than 20% below its January-February highs. Money9 Live likewise said returning overseas money was concentrating on chosen mid-cap and small-cap names rather than lifting the whole market.
There are, however, early signs that the pressure from abroad may be easing rather than intensifying. ETMarkets said a turn in foreign flows could help any rebound, and Money9 Live reported that after four straight months of selling from March to June, foreign investors were net buyers in July to the tune of about US$2.5 billion. It said they followed that with purchases worth ₹13,123 crore in August, suggesting that the exodus may be slowing even if conviction about the wider market has not fully returned.
For retail investors, the lesson from this episode is less about panic than patience. Swastika Investmart, citing market analyst Tanay Sukumar, framed the past two years as a test of discipline rather than a signal of systemic damage, arguing that quick bets have worked poorly in a drawn-out consolidation. JantaScope made a similar point from a different angle: when the index moves sideways for long enough, stock selection, valuation and risk management matter more because the benchmark can hide big differences between sectors and individual companies.
That leaves India in an awkward middle ground: not cheap enough to be an obvious bargain, not broken enough to force capitulation. JantaScope said a Reuters survey of 28 analysts conducted between 13 and 26 August put the median Sensex target at 89,000 by the end of 2027, with more than 70% of respondents not expecting a major correction in the next few months. But the same survey underlined how much has to improve first: stronger earnings in large caps, steadier oil prices, friendlier valuations and a convincing return of foreign capital. Until then, India’s market may keep advancing in fragments while its flagship index remains short of its old peak.
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