Indian equities have aligned with the recent rebound in global markets, as nearly 94 percent of Nifty and BSE-200 constituents reported gains in April. However, benchmark indices continue to lag behind their major global counterparts, according to a strategy report by Motilal Oswal Financial Services.
The Nifty 50 index remains approximately 8 percent below its peak in September 2024 and around 5 percent below pre-war levels, even as several global indices have reached new highs following a March sell-off. “This broad-based recovery is in line with global markets. India, however, is lagging,” the report noted.
Currently, global markets are anticipating earnings-per-share (EPS) growth of 20-40 percent, while India’s expected growth is around 18 percent, highlighting corporate earnings as a key factor for future market returns.
Fund Flows
Markets in the US, South Korea, and Taiwan have experienced outperformance, largely driven by robust global fund allocation towards themes such as artificial intelligence and semiconductor manufacturing, where India has comparatively lower exposure. Domestic institutional investors (DIIs) have provided substantial support to the market amid ongoing foreign selling. In April, DIIs invested $5.4 billion, marking the twelfth month of significant buying activity, excluding February 2026.
Conversely, foreign portfolio investors (FPIs) have been net sellers of Indian equities this year, withdrawing about $21 billion, while DIIs have contributed approximately $33 billion during the same timeframe. The brokerage identified commodity prices, particularly crude oil, as a significant near-term risk for Indian equities and corporate profitability. “If crude remains above $100, it will squeeze corporate margins,” the report warned.
Crude Impact
Elevated crude prices are closely monitored by the markets as India imports more than 80 percent of its oil needs, making sectors such as aviation, paints, chemicals, and consumer goods susceptible to input cost pressures. Regarding valuations, the report from Motilal Oswal Financial Services stated that large-cap stocks currently offer more favorable prospects compared to small- and mid-cap segments. The Nifty 50 is trading at 19.1 times forward earnings, about 9 percent below its long-term average, while small- and mid-cap indices continue to trade at premium valuations.
“SMID stocks continue to trade at a premium, suggesting a more stretched risk-reward profile in those segments,” the report concluded.
