India's Stock Market Lags Global Peers Despite Strong Economy, UTI Explains Why

India's stock market is underperforming global peers despite strong economic growth, with the Nifty50 index lagging behind the S&P 500 and Japan's Nikkei 225 in annual returns from 2023 to 2025. Asset manager UTI attributes this partly to a record surge in new stock supply, including IPOs and share sales by existing shareholders. Foreign investors withdrew $24.1 billion from Indian stocks by August 2026, while domestic SIP inflows reached about $24 billion. UTI argues that overseas selling, earnings downgrades, and high oil prices do not fully explain the market's weakness, noting the underperformance began before these factors intensified. UTI highlights a structural shift: large-cap valuations have fallen below historical averages, while small-cap valuations have risen significantly. The firm advises that investment success now depends more on analyzing corporate earnings and valuation discipline, as domestic and foreign investors are increasingly buying different segments of the market.