India’s economy is growing faster than a startup funded by venture capitalists who have not yet discovered the concept of unit economics. Yet somehow the stock market has decided to move in the opposite direction—like a teenager who refuses to smile in family photos out of pure principle.
The disconnect is real. While GDP expands at a pace that makes other nations weep into their spreadsheets, Indian equities have tanked hard enough to make investors question whether they accidentally bought shares in a company that manufactures anchors.
What is going on? Mostly, India’s market is just following the global script. International investors—spooked by interest rates that are not quite low enough and uncertain about whether the world will actually avoid a recession—have been yanking money out of emerging markets like they are leaving a party early. India, being the most obvious place to park growth bets, gets hit the hardest when the mood shifts.
Add to this the fact that Indian valuations had gotten genuinely expensive. Stock prices had run so far ahead of actual earnings that the market was essentially pricing in a future where Indians invented time travel and went back to 2015 to buy everything twice. When reality failed to deliver that miracle, gravity did its job.
There is also the small matter of domestic factors: corporate earnings growth has disappointed, inflation concerns linger, and some large investors decided simultaneously that now was the time to take profits. None of this means India’s economy is broken. It just means the stock market is behaving like a stock market—which is to say, irrationally confident one day and panic-stricken the next, regardless of what is actually happening in the real world.