Hello, this is Priyanka Salve reporting from Singapore. Welcome to the latest edition of “Inside India,” your essential source for breaking news and updates from one of the world’s fastest-growing economies. Currently, Indian markets are facing turbulence in the wake of escalating tensions from the Iran war, prompting concerns among foreign investors and driving valuations to concerning lows. However, fund managers suggest that merely low prices may not be sufficient to tempt investors back into the fold.
For months, fears over trade relations with the U.S. were viewed as the primary risk to Indian equities. Following a trade agreement in February, foreign investment surged by nearly $2.5 billion. However, just a month later, this momentum has dissipated dramatically. In March, India’s benchmark Nifty 50 index plummeted by over 10%, with foreign investors offloading more than $12 billion in equities-the most significant sell-off on record. The Nifty’s price-to-earnings ratio now sits at 19.6 times, a level seldom seen in the last decade, matched only by the early phases of the COVID-19 pandemic and the onset of the Russia-Ukraine conflict.
Pramod Gubbi, co-founder of Marcellus Investment Managers, pointed out that the ongoing conflict in the Middle East has highlighted India’s structural vulnerabilities. If the war persists and oil prices remain high, it could further strain India’s fiscal deficit, inflation, and currency-factors that would ultimately dampen demand and corporate earnings. Additionally, the Chief Economic Advisor, V. Anantha Nageswaran, has warned that the country’s forecast growth rate of 7.0% to 7.4% for the fiscal year ending March 2027 is at “considerable downside” risk largely due to rising energy costs and disruptions in supply chains linked to the Iran situation.
In response to these challenges, the Indian government recently introduced two significant measures: limiting banks’ currency-hedging positions to stabilize the rupee and cutting excise duties on petrol and diesel to prevent retail fuel price spikes. While these actions have provided some relief for the rupee, experts like Nitin Jain from Kotak Mahindra Asset Management caution that artificially low fuel prices-if maintained too long-could adversely affect government spending on essential areas like capital expenditure.
While the challenges facing Indian markets may eventually abate if the Iran conflict resolves swiftly, concerns about persistently weak earnings growth loom large. According to a report by Ambit Capital, the substantial earnings cuts seen over recent months are the largest in four years. Investors are expected to focus on the credibility of earnings, suggesting that falling valuations alone won’t entice them back.
Currently, net overseas direct investment into Indian businesses hovers between $1 billion and $2 billion, significantly lower than in Brazil and Vietnam. Despite the attractiveness of India’s consumption narrative, the inability to generate substantial white-collar jobs undermines this appeal. A recent study from Azim University highlighted that a small percentage of graduates secure stable employment soon after graduation. As consumption remains a key driver of India’s economic momentum, experts emphasize that without job creation, consumer demand could falter.
In other news, Indian telecom giant Bharti Airtel has raised $1 billion for its data center arm, Nxtra Data, with substantial investments from private equity firms. Meanwhile, IndiGo has announced the appointment of industry veteran William Walsh as its new CEO, effective early August.
As the Indian government navigates these economic challenges, the upcoming figures, including the HSBC Composite final PMI for March and the RBI’s monetary policy meeting on April 8, will be closely watched for insights into the economy’s trajectory. Stay tuned to CNBC for all the latest developments.
Original Source: https://www.cnbc.com/2026/04/02/iran-war-indian-stocks-meltdown-worsen.html
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Publish Date: 2026-04-02 07:45:00
