Indian stocks poised for first annual dip since 2015

Indian stocks are on track for their first annual decline since 2015 after foreign investors sold more than $23 billion of equities in 2026. The Nifty 50 has fallen about 8.5% year-to-date.

A May 15-27 poll of 24 equity analysts projected the Nifty 50 at roughly 26,000 by the end of 2026, an increase of about 8.7% from the most recent close but implying an annual drop of about 0.5% if forecasts hold. The poll put the Nifty at 27,000 by mid-2027 and 29,000 by the end of 2027. The BSE Sensex was forecast to reach 84,150 by end-2026 and 87,895 by mid-2027. Median estimates were cut sharply from a February survey conducted before the recent flare-up in the Middle East.

Foreign selling this year has surpassed last year’s record outflows. Domestic institutional investors now hold a record share of listed stocks while foreign ownership has fallen to an all-time low. Retail flows via systematic investment plans, which have expanded nearly tenfold over the past decade, have helped steady markets but fund managers report those plans are showing signs of strain.

Analysts point to stretched valuations as a major factor. Indian equities trade at more than 20 times forward earnings and offer among the lowest dividend yields across major markets. Investors have redirected capital toward markets and sectors tied to artificial intelligence, where returns have been stronger.

South Korea’s technology-heavy KOSPI has risen more than 200% over the past year, while India’s large-cap information technology index has fallen by over a third since December 2024.

Rajat Agarwal, Asia equity strategist at Societe Generale, noted that many investors are focused on AI winners and that returns and earnings growth for a range of Indian companies have been weak, contributing to outflows.

Thirteen of the 24 analysts surveyed said a market correction was likely within the next three months. They also highlighted external risks that could further pressure markets, including higher energy prices and a widening current account deficit if Middle East tensions push up oil costs.

India remains one of the world’s fastest-growing major economies, but equity performance this year has lagged most global peers. The poll’s forecasts suggest a gradual recovery through 2027 if conditions stabilize.