India's stock market has shown resilience, with the MSCI India index gaining 10.8% between the end of March and August 19, 2026. This recovery follows a 9.3% drop in the index from the start of the year to August 19, attributed to macroeconomic headwinds such as crude oil price volatility due to ongoing conflicts and cost inflation in the AI supply chain.
Despite these challenges, there are signs of renewed investor interest, with $2 billion of net inflows recorded in June. Chetan Sehgal, lead portfolio manager at Templeton Emerging Markets Investment Trust, noted that India has been affected by crude oil price volatility and its role as a major importer in the AI supply chain.
India's economy grew by 6.5% in 2025, positioning it as the fifth-fastest growing and sixth-largest global economy with a GDP exceeding $4.1 trillion. This growth is supported by a young, expanding middle class and reforms like the Goods and Services Tax (GST) and the Unified Payments Interface (UPI).
The number of registered GST taxpayers increased from approximately 6.7 million in 2017 to 16.5 million by May 2026. The UPI processed over 240 billion transactions in FY2025/26 and had more than 550 million users by June 2026, integrating more consumers and businesses into the formal financial system.
Sectors like IT services, financial services, pharma and healthcare, and consumer discretionary spending are seen as appealing investment opportunities. IT services companies, including Tata Consultancy Services, Infosys, and Wipro, maintain advantages from a skilled workforce and global delivery capabilities. The expansion of formal payment and tax systems through UPI is also supporting growth in financial services.