Indian Equities Remain Stuck in a Two-Year Grind

Indian equities have struggled since September 2024, with the Nifty down 11.6% and Sensex down 13.6% over two years, though mid, small, and micro-cap indices have fared better, showing mixed returns and testing investor patience. Fund managers face difficulty generating returns, increasingly relying on technical signals over fundamentals. Foreign investor appetite remains modest due to elevated global bond yields and higher oil prices, while intermittent surges in smaller stocks have sustained retail interest. Valuation froth has eased, with the Nifty trading at 20.9 times earnings, below its five-year average. India's forward PE of 18.5 times now trails major markets like the US, though global investors still lack concrete triggers for substantial investment.