Two years ago this week, the Nifty50 closed at 26,004, a record. On Friday, it closed at 23,140. The household that bought into an index-linked fund in September is down 8.8 percent on its investment even after accounting for dividends. Citizen Janardhan, who put the same money into an SBI fixed deposit—the dullest instrument in Indian markets—saw it compounded at more than 9 percent, given an appropriate tenor.
Those who bet on equity are beyond disappointed. The Sensex is below its 200-week moving average and the Nifty has slid for seven consecutive weeks, its longest downhill streak since 2020. Infosys has fallen for eight straight sessions. Reliance Industries has hit a fresh 52-week low. For the equity investor, the only good news is that there is no tax—since there is no gain.
The spectre turns surreal if we look at the numbers the economy has been printing. The latest reading says real GDP is up 7.8 percent. Household spending: up 9.9 percent. Net direct tax collections: up 13 percent. Gross GST: up 14.8 percent. So here’s the India paradox: output rising, spending rising, direct and indirect tax collections rising—and stocks falling.
The distance between output and consumption is vivid. Equipment makers Amber Enterprises and Dixon Technologies are up 8.8 percent and 10.2 percent, whereas the brands they build are down—Voltas -22.3 percent, Havells -21.4 percent, Blue Star -15.7 percent, Crompton -9.9 percent.
The contradiction is manifest in sales and profits data. Consumer goods volumes are up barely 4-5 percent in an economy growing at 7-8 percent. Maruti, down 25 percent since last year, sold more but disappointed in terms of profits. Consumption is skewed in a K-shape of haves and have-nots. Premium products are doing better than mass-market goods.
In packaged food, Nestlé is up 7.2 percent, whereas Patanjali is at -34.1 percent. Nykaa is up 25.4 percent and Titan up 18.4 percent, whereas the shares of Trent and Aditya Birla Fashion are in negative territory. IndiaMART, which connects producers with buyers, fell 24.4 percent, while Eternal, which delivers to upwardly-mobile households, rose 15 percent.
The bottomline is that while the GDP counts volume, the market prices profit. And this year, the two parted company. Nifty, which slid 9 percent between September and Christmas of 2024, spent all of 2025 rising 10.5 percent. This year, it has slid 14.5 percent since March. The war in West Asia pushed up oil, leading to the rupee’s fall and foreign investors’ exodus. Foreign institutions have pulled Rs 2.4 lakh crore out of Indian markets this calendar year, as against Rs 1.66 lakh crore in the whole of 2025. BSE’s Dollex 30, the dollar-denominated version of the Sensex, is down 25 percent over a two-year period and the BSE500 around 20 percent in dollar terms. The sliding rupee is the tax nobody legislated.
The returns table of indices presents an intriguing bifurcation. Between January 2 and September 25, the Nifty50 fell 12.3 percent, the Nifty100 10.1 percent and the Nifty500 6.6 percent. The picture reverses down the market cap ladder: Nifty Midcap 100 is flat, while Small Cap 100 is up 10.4 percent, and Microcap 250 is up about 17 percent. The explanation: foreign investors sold large caps, so the Nifty50 is down. Captive Indian investors primed small caps loading up on systematic investment plans.
Last September, the government unveiled GST 2.0, collapsing the frame into two slabs and cutting the tax rates of what Indians buy. Gross collections surged as per the headline figure. But the devil is in the details. Refunds are up, apparently because the frame taxes inputs at a higher rate and output at a lower one. Import GST is running at 27+ percent, while domestic GST revenue growth is in single-digits. The signal is not the index—the weaker rupee is both the cause and the consequence. But it ain’t the rupee’s fault alone.
The Indian household took three different approaches to spending. John Jani Janardhan postponed consumption. The consumer is down at heel, and which is showing up literally in the stock performances of Bata, Campus and Metro—all walking backwards, year-to-date. Paint-makers are also in the red—Asian Paints at -11.6 percent YTD, Berger -12.5 percent, Nerolac -23.7 percent. Home and personal care, too, took a hit, with some shine off Colgate, Lever and Godrej Consumer. Not everything can be deferred—for instance, healthcare. Dr Lal Path Labs is up 28.7 percent, Apollo Hospitals 25.5 percent and Medanta 23 percent. Jewellery went up as India married its youth and chose gold to save money.
There is also substitution. More than 30 million Indians travel abroad annually. As the currency dipped and costs rose, Indian arrivals in Vietnam touched 6.12 lakh—up 45.6 percent. The reason: a premium hotel night in Hanoi or Kuala Lumpur costs less than in Goa or Udaipur. Unsurprisingly, hotel stocks are sliding—Indian Hotels (which owns the Taj brand) is down 2 percent, Oberoi 13 percent and mid-market player Lemon Tree is down 31 percent. Those who could did not stop travelling; they just chose somewhere cheaper and better.
Beyond the external factors, there is a structural faultline in India’s consumption profile. The Union finance minister said this week that consumption depends on upward mobility. And mobility depends on a rise in income and in the number of income earners. Charles Dickens put the household ledger in perspective. Micawber’s arithmetic in David Copperfield says on an income of £20 a year, a sixpence surplus is happiness. Spend sixpence more and that is misery. India’s household is still on the right side of that sixpence. It got there by not buying things.
The gap between ability and desire defines consumption. The K-shaped economy is poised at an intersection. Indians, like Micawber, tend to wait “until something turns up”.
Read all columns by Shankkar Aiyar
Shankkar aiyar
Author of The Gated Republic, Aadhaar: A Biometric History of India’s 12 Digit Revolution, and Accidental India
(shankkar.aiyar@gmail.com)