Dear Readers,
Nomura which is one of the world's leading banks, based in Japan has advised foreign institutional investors (FIIs) to shift their investments from the Indian stock market to the Chinese and Korean markets. Many of us, however, might simply brush aside this news, wondering what relevance the stock market holds for us personally.
You may have witnessed the practice in Siddha medicine where a physician diagnoses an ailment by examining a patient's pulse. In many Tamil films, you might have seen scenes where a midwife or a Siddha doctor feels a woman's pulse to determine whether she is pregnant. Even practitioners of modern medicine acknowledge that the pulse serves as a mirror reflecting underlying physical health conditions. Similarly, the stock market acts as a mirror that reveals whether a nation's economy is in a healthy state.
The primary allegation leveled against Adani is that he repeatedly bought and sold shares of his own companies to artificially inflate their prices. It is precisely because such manipulation is possible that we sometimes characterize the stock market as a form of gambling. However, while it is one thing to note that such artificial inflation or deflation cannot be sustained over the long term, it is quite another to consider the sheer impossibility of manipulating an entire nation's stock market—a feat that would require hundreds of thousands of crores of rupees. Consequently, no matter how much a stock's price is artificially manipulated in the short term, it is ultimately a company's genuine growth and profitability that determine its true value over the long run.
As on January 1, 2024, India's Sensex index was at 72,271.94 pts; As of March 30, 2026, it stands at 71,947.55 pts. If an investor purchased a small quantity of shares maintaining equal weightage across all 50 stocks comprising the Sensex index on January 1, 2024, they would observe 27 months later that their investment had not merely failed to grow, but had actually depreciated in their investment value as well.
It might appear that this decline, but a market slump of over 10% since the outbreak of the war in Iran is solely attributable to the conflict. However, if one notes that the Indian stock market has experienced declines of this magnitude on several other occasions such as in June 2024 and April 2025 it becomes evident that the current downturn is not merely a consequence of the war.
Nomura, too, did not limit its analysis to the crises anticipated as a result of the geopolitical conflict. It highlighted the looming challenges facing India's pivotal export sector, especially with software services due to the advent of Artificial Intelligence (AI); indeed, it noted that investor apprehensions regarding the Indian stock market had begun to surface even before the commencement of the war. The irony lies in the fact that India—a nation that develops and exports software to the entire world—lacks a proprietary AI ecosystem of its own. Nomura identifies this failure to invest in such capabilities as a significant weakness for India. While other financial institutions other than Nomura have also downgraded their ratings for the Indian stock market as well. But Nomura went up further a step further, recommending to shift the investment focus to China and Korea from India which is a great alert to be taken so cautious.
Even prior to the issuance of this recommendation by Nomura, foreign investors had already begun exiting the Indian market on a massive scale. In the month of March alone, the capital withdrawn from the Indian stock market by Foreign Institutional Investors (FIIs) amounted to ₹1.14 lakh crore. The percentage of capital outflow witnessed currently exceeds the percentage observed during the 2008 crisis. For the past few years, Foreign Institutional Investors (FIIs) have been exiting the Indian stock market on a massive scale continuously. The reasons for this include not only the lack of genuine economic growth but also the excessively high taxes imposed by the government on stock market transactions. If one is compelled to pay taxes even when there is absolutely no growth, does that not amount to a financial loss? Furthermore, the depreciation of the Indian Rupee is another contributing and concerning factor along with the heavy taxation structures. Even in the latest budget also the Securities Service Tax (SST) has been increased a lot. This is precisely why foreign capital is gravitating toward nations with lower tax regimes.
It is this continuous outflow of capital that triggers persistent declines in the market. However, these declines are mitigated to a certain extent by investments from Domestic Institutional Investors (DIIs)—including entities such as Life Insurance Corporation Ltd (India's biggest Life Insurance Company from the Government side), banks and other Asset Management Companies. While the massive outflow of foreign funds happens in the market, it is being compensated with the steady inflow of the local fund as well into the market.
The primary reason for such massive inflow of domestic investment is that from individuals particularly those within the middle class segment, opting highly for Systematic Investment Plans (SIPs) as their preferred savings pattern over the traditional bank deposits including Fixed Deposits.
This substantial and steady surge in domestic investment is a direct result of ordinary citizens realizing that the stock market offers faster growth potential than traditional bank savings, and consequently, beginning to participate in it.
However, it would be big question to the market is that would this be actually reaping the benefits of that growth?
