Five reasons India's stock market is sinking even when its economy is growing

India's economy is growing at an enviable rate of over 7% despite global energy shocks, rising interest rates, tariff uncertainties and weather-related disruptions.

But the world's fastest growing major economy also has one of the worst performing major equity markets in 2026. The correction in Indian stocks has, in fact, only intensified in recent weeks.

The benchmark Sensex and Nifty indices, which represent the country's largest companies, have inched up slightly since Monday after posting losses for eight straight weeks - the longest losing streak in 25 years, according to Reuters.

Indian mom-and-pop investors who put their money into the Nifty have seen their wealth erode by about 15% this year. In comparison, they would have made 62% returns on Korea's Kospi index since January or 170% in the last two years.

On aggregate, the money foreign investors have put into Indian markets in the past decade - after subtracting what they sold or withdrew - is nearing zero. In the past two years alone, foreign institutional investors have withdrawn a staggering $40bn, according to data from Bernstein Research.

It is the large pool of domestic institutional and retail money, flowing into instruments like mutual funds, that have helped the markets avoid a sharper fall.

Domestic assets under management of mutual funds have grown from about $125bn in 2016 to some $900bn this year, with the number of Indians parking money in stocks and mutual funds more than tripling to 150 million individuals.

This makes the recent fall in the markets more worrying - since households, already struggling from a weak job market, high inflation and faltering consumption, are now seeing their equity savings take a beating too.