India’s domestic economic strength, including robust growth and steady household demand, positions its markets to weather global uncertainties in 2026-27, according to SEBI’s Annual Report, despite geopolitical tensions and volatile energy prices looming on the horizon.
India’s financial markets are set to benefit from solid domestic economic conditions in 2026-27, even as global risks remain stubbornly high, according to SEBI’s Annual Report 2025-26. The regulator said India entered the year with resilient growth, strong services activity, public investment and firm household demand, but warned that geopolitics, energy costs and erratic foreign capital flows could still unsettle markets.
SEBI said the economy stayed broadly resilient through 2025-26 despite a difficult external backdrop. It estimated real GDP growth at 7.7% for the year, up from 7.1% in the previous period, with private consumption and investment remaining the main engines of expansion. The report also pointed to improving inflation trends, healthier corporate balance sheets and steady domestic institutional buying as key supports for the market.
That outlook was echoed earlier in the year by Shaktikanta Das, principal secretary to the prime minister, who said India’s economy had remained robust despite geopolitical tension and trade barriers. He projected real GDP growth of 7.4% in FY26 and pointed to the post-pandemic recovery as evidence of underlying strength, with debt ratios also improving room for policy support. The Reserve Bank of India likewise said in April that domestic activity remained resilient in the second half of 2025-26, helped by consumption, reforms and government infrastructure spending.
Even so, SEBI said Indian equities had a difficult 2025-26, with the Nifty 50 and broader markets falling about 14% in dollar terms. Foreign portfolio investors sold a record $19.7 billion of Indian equities during the year, reflecting rupee weakness, valuation concerns, slower earnings growth and the effect of Middle East tensions. Domestic mutual funds and other local institutions helped cushion the damage with steady inflows.
Looking ahead, SEBI said the most important variables for markets will be whether global geopolitical tensions ease, oil prices normalise and overseas capital returns. The report warned that prolonged conflict in the Middle East and crude above $100 a barrel could widen India’s current account deficit and add to inflation pressure, while also raising the import bill. It said strategic petroleum reserves, import diversification and targeted fiscal support would remain important buffers if energy markets tighten again.
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