Your ability to grow your wealth depends on how India’s economy grows. Last week’s growth data showed a robust quarterly performance, and the Reserve Bank of India said it received record deposit money from non-resident Indians, who earned higher tax-free interest on their 3-to-5-year deposits. That should cheer those worried about the rupee touching record lows. Analyst reports after the June 2026 quarterly results also said most major companies posted better-than-expected profits and revenue.
Yet India is not the darling of the global stock market. Foreigners prefer markets like the US, Korea and Taiwan, and they are net sellers in Indian equities. Domestic mutual funds have no choice but to keep buying Indian shares, supporting the market like bedrock.
Other markets are also attractive. For a long time, India’s 14-15% compounded annual growth rate of profits was an attractive proposition. Indian shares outperformed markets until mid-2025, but the AI-led tech boom changed that. An analysis by brokerage Motilal Oswal shows that companies led by NVIDIA are doubling profits every year and are likely to do so even this year. Companies like Micron, Samsung, and SK Hynix are growing at twice or thrice that rate. A large chunk of foreign institutional money is flowing into these companies. Even the broader S&P 500 and the tech-heavy Nasdaq are growing profits at twice the rate of the Nifty 50 and Nifty 500. As a result, Nifty 50 and Nifty 500 have stayed flat over the past year, while large, heavyweight indices like the S&P 500 and Nasdaq 100 rose 19% and 22%. That shows expectations are higher in US indices even when trillions of dollars of assets are held in index funds linked to them.
No major country in the world has produced 7.8% growth in a single quarter. US Treasury bond yields hint at a rising-rate scenario, yet investors are still betting on better profits in those countries.
That shows India’s economy is doing fine but remains well below its potential. Despite strong tax revenue growth and government spending on infrastructure, India’s growth data is failing to create any ‘wow’ factor.
Two factors are making India hobble. The dramatic growth rate is not creating enough jobs for the surging number of young people entering the job market. That is clear from the performance of consumer company shares. The Nifty FMCG index is down 20% while the Nifty 50 has stayed flat and US markets have boomed. That suggests India’s consumption story is faltering because consumption has not increased significantly. People are not spending money because they are not earning enough.
The second factor is women's underwhelming participation in the formal workforce. That does not get counted in GDP, as many women work in agriculture or domestic households. We need to move beyond handouts and create more income-generating options for women and the young on a war footing.
What does it mean to you?
You need to stay invested and ensure appropriate asset allocation across asset classes. Rising interest rates mean you will continue to have a risk-averse strategy. You will find your fixed deposit rates are holding firm. However, falling or sluggish equity share prices could make businesses with strong financials look cheaper. Your priority should be to engage a professional advisor and discuss your plans. The thumb rule is simple: allocate more equity to long-term goals and keep fixed income for short-term goals.
