Indian stocks lose steam

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Good morning. A few weeks ago I read a thread on X by someone who was complaining about going abroad on a holiday and running into too many fellow Indians there. I found his anguish comical, but there is no denying that we are holidaying overseas as if our lives depend on it. And IndiGo is hoping to cash in on this by expanding its footprint (wingspan?) abroad. But first, why has the stock market taken a flight south?

Low stock

Indian equities have been sliding downward for several weeks, with some indices now entering bear market territory. The 30-stock benchmark BSE Sensex has been trading around 76,000, down around 7.5 per cent since mid-December and nearly 10,000 points from its all-time high of 85,978 in September 2024. Small- and medium-cap stocks have taken the biggest beating: the BSE SmallCap index is down 21 per cent from its highs and the BSE 150 MidCap 150 is down 19 per cent. I could quote more figures to illustrate the trend, but you get the picture, so let’s look at what is causing this slide and what the future holds.

Foreign portfolio investors have largely been pulling money out of India since September last year and that trend continues. In January, they withdrew Rs780bn ($9bn) from India and, so far in February, they have taken out another Rs212bn. India’s loss is China’s gain, with foreign investors getting in on a market upswing there, especially in technology stocks, after the big reveal of homegrown Chinese generative AI product DeepSeek.

In the past few years in India, we have tended to think that since we have strong domestic participation in the markets, we needn’t worry about foreign money. It is true that the introduction of regular monthly investing using “systematic investment products” offered by mutual fund houses has funnelled a lot more household savings into equity markets. But large withdrawals by foreign investors continue to be significant market movers. The other factor in the growth of domestic investments is direct trading by retail investors who “discovered” stocks as a potential income stream during the coronavirus pandemic. This is the first market downturn these new, and mostly young, investors have witnessed and current losses are likely to have a snowball effect.

So what is the outlook? In my conversations with fund managers and institutional investors, the overwhelming sense I gleaned was that there are no triggers in the immediate future likely to significantly alter the trend. The predictable big events (budget, interest rate cut) are behind us. Indian stocks are overvalued, even at current levels. There is massive uncertainty around the world — with Trump shaking things up economically (tariffs) and politically (Gaza, Ukraine). Things are likely to get worse before they get better. As always, at the individual stock level, there are profits to be made. But, without some sudden positive developments, the overarching narrative is likely to continue to be negative for a few more months.

What is your outlook for the Indian stock market? Hit reply or email us at indiabrief@ft.com.

Taking flight

IndiGo is spreading its wings. The no-frills budget airline, which brought a certain brisk efficiency to Indian skies, is now adding international destinations, and a whole bunch of frills, to grow its business. By the end of March, IndiGo will serve 40 foreign destinations, including direct connections to Jakarta and Nairobi, up from 26 two years ago. In mid-November, the airline launched IndiGoStretch on popular routes, offering a business class-like experience with more legroom and baggage allowances. It also rebranded its flailing rewards programme, relaunching it as BluChip.

At 63 per cent market share, IndiGo has nearly two-thirds of India’s domestic market. In the 18 years the airline has been in operation, it has seen many of its competitors fall by the wayside. The company survived by maintaining a razor-sharp focus on keeping costs low and achieving a high level of efficiency in its operations. Even when top management has changed, its fundamental operational tenets have not. The airline focused on getting you to your destination on time and with the least amount of fuss. IndiGo’s (mostly-female) blue-clad customer service staff also captured a cultural zeitgeist — exuding a confidence and efficiency that matched India’s economic mood in the noughties amid a second wave of post-liberalisation growth.

Pieter Elbers, who took charge at the airline in 2022, is betting on Indian outbound tourism to grow his business. By 2027, India is expected to be the world’s fifth-biggest outbound tourism market, worth $89bn, more than double the value recorded in 2019.

Though demand growth is robust, several challenges remain. The past three decades of India’s aviation industry are replete with stories of those who dreamt too big and crashed. In this sector, nothing is more damaging than irrational exuberance. There are many examples — Jet Airways and Kingfisher Airlines immediately spring to mind — of aviation players who borrowed too much to expand and then found themselves grounded. IndiGo will have to walk the tightrope between ambition and maximising efficient use of its aircraft in order to avoid the same fate.

Go figure

An outbreak of Guillain-Barré syndrome that started in Pune in Maharashtra has spread to other states. Andhra Pradesh on Sunday recorded its first fatality from the syndrome, a disorder where the immune system attacks nerve cells.

My mantra

“Clarity of purpose is essential. It sharpens focus, ensuring that every decision — whether for the group, a business, or a single day — is aligned with the larger vision. In a world filled with constant distractions, this clarity acts as a filter, allowing me to prioritise what truly matters and drive meaningful progress.”

— Anish Shah, group chief executive, Mahindra

Each week, we invite a top Indian business leader to tell us their mantra for work and life. Want to know what your boss is thinking? Nominate them by replying to indiabrief@ft.com.

Quick question

What is your current stock market strategy? Take part in our poll here.

Buzzer round

On Friday we asked: Which country now controls more of the world’s supply of nickel than Opec did of oil at the cartel’s peak in the 1970s?

The answer is . . . Indonesia, which now accounts for 61 per cent of global refined nickel supply.

Agasthya Vivek was the first to send us the correct answer. Congratulations!

We had quite an enthusiastic response for the quiz this week. Additional shout-outs to Mohammed Minhaajuddin and Akhilesh Kumar Karn, who came in second and third.

Thank you for reading. India Business Briefing is edited today by Mure Dickie. Please send feedback, suggestions (and gossip) to indiabrief@ft.com.

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