Indian equities trail emerging markets by widest margin in decades
What's the story
The Indian stock market has witnessed its worst relative performance in nearly three decades, according to a report by global brokerage firm Jefferies. The report highlights that Indian equities have significantly lagged behind their Asian and emerging market counterparts this year. The MSCI India index has gained only 2.2% in US dollar terms on a total-return basis year-to-date, while the MSCI AC Asia Pacific ex-Japan index has risen by nearly 26%.
Economic indicators
Broader economic slowdown reflected in market performance
Jefferies's report also highlights that the Indian stock market's weak performance is a reflection of a broader cyclical slowdown in the country's economy. The earnings growth for MSCI India companies has slowed down, with an estimated growth of around 10% for FY26 ending March 31, 2026. This is a sharp decline from the stronger growth witnessed in previous years.
Currency impact
Indian rupee's depreciation impacts market performance
The depreciation of the Indian rupee has also weighed on the market performance. The currency has depreciated by 5.3% against the US dollar in 2025, crossing the psychological level of 90 in December. Jefferies noted that while there is hope this could be a bottom for the rupee, risks remain.
Trade issues
US tariffs and trade deficit concerns
The report also raises concerns over the continuation of 50% tariffs imposed by the United States on India since August. Jefferies warned that these tariffs could further widen India's trade deficit, which rose by 11.3% year-on-year to a record $282 billion in the first 11 months of 2025. Despite hopes for a trade deal, these tariffs remain in place, adding pressure on India's market performance.