India Investment Case — The India Skeptic’s Case, Answered

A few weeks ago a friend visiting from Berlin asked me, half-seriously, why he should still bother with India. His argument was simple: the NIFTY has gone nowhere for two years, the rupee keeps sliding against the euro, and foreign investors have been heading for the exits. He wasn’t wrong about any of those three facts. He was wrong about what they add up to.

The macro backdrop, briefly

Start with the boring part, because it’s the part that actually matters over a decade. The IMF’s July 2026 update puts India’s real GDP growth at 6.4% for FY27 — trimmed slightly from an earlier estimate because of higher energy prices after the Iran-US conflict, but still comfortably the fastest pace among the world’s major economies. China is tracking under 5%, the US around 2%, and the Euro Area under 1%. The IMF has actually revised India’s FY28 number upward.

Politically, the picture is unusually stable for an economy this size and this diverse. 2024 delivered a third consecutive term for the incumbent government — only the second time that’s happened in India’s independent history — on a turnout of around 66%. And in August 2025, S&P upgraded India’s sovereign credit rating for the first time in eighteen years, citing fiscal discipline and policy credibility. That upgrade landed just days after Washington slapped a 50% tariff on Indian goods and Trump called India a “dead economy” — which tells you rating agencies were pricing structural fundamentals, not the week’s headlines.

Layer on top of that a genuinely liberalised FDI regime — India pulled in over $81 billion in FDI in FY25, roughly 90% of it through the automatic route requiring no government approval at all, insurance caps raised to 100% ownership, tens of thousands of compliance requirements stripped away — and you have the case for India before we even touch the stock market. That’s the context my Berlin friend was leaving out entirely.

It’s also only half the FDI story, and it deserves stating rather than glossing over. Net FDI — gross inflows minus repatriation and Indian companies’ own investment abroad — collapsed to around $0.4 billion in FY25, down from $10.1 billion a year earlier, the lowest level in more than two decades. Repatriation by foreign investors rose to $51.5 billion, and that’s been a multi-year trend, not a single bad year. The RBI’s own interpretation is that this reflects a maturing market where capital moves freely in both directions, rather than a red flag — a reasonable view, but not the only one, and the scale of the decline is a genuine open question. A fair account of the India story holds both figures at once: the regime is open, but a good deal less capital is staying put than the gross number alone would suggest.

Now, to his three specific complaints.

Myth 1: “The NIFTY hasn’t moved in two years”

This one’s just true, and I’m not going to pretend otherwise. The NIFTY 50 sat around 24,479 in July 2024, touched an all-time high near 26,277 that September, took an ugly 11% single-month hit in March 2026 when the Iran-US war rattled markets, and as of this month is back to roughly where it started. Flat, marginally negative, over two years.

But an index level and an investor’s actual return are not the same number, for three reasons. First, the headline NIFTY doesn’t include dividends — the total-return version, which is what you actually own in most funds, always runs ahead of the plain index. Second, “flat index” hides enormous dispersion underneath — financial services, capital goods and consumer sectors have quietly outperformed while the headline churned sideways. Third, and this is the one people underrate: millions of Indians have kept dollar-cost-averaging into equities every single month through this entire “flat” stretch via SIPs, which hit record monthly inflows in March 2026. They weren’t buying at one bad peak — they were buying steadily across two years of volatility, which is exactly what you want if you believe in the ten-year story.

And the ten-year story is the one that matters for an equity allocation decision — the NIFTY’s actual 10-year CAGR runs in the low-to-mid teens, comfortably ahead of inflation, despite the recent stall. Two flat years is real. It’s also not a verdict on the decade.

Myth 2: “A falling rupee will wipe out my euro returns”

This is the one worth taking most seriously, because the premise is correct — the rupee genuinely has weakened hard against the euro, roughly 47% cumulatively over the past decade. That’s a real cost, and no honest case for India pretends it isn’t.

The question is whether Indian equity growth was large enough to absorb that currency hit. I ran the numbers both ways — forward and backward — and the answer, somewhat surprisingly, is yes, with room to spare. Someone who converted euros to rupees ten years ago, invested in an India-linked equity product tracking something close to the NIFTY’s actual long-run return, and converted back to euros today at today’s much weaker rate would still land with a result broadly comparable to — in the more typical scenario, modestly ahead of — what the DAX delivered over the same ten years on a total-return basis. The currency drag was real. India’s equity growth simply outran it.

I also ran the harder test: what if you invest today and the rupee’s slide accelerates well beyond its own historical pace over the next decade? Even in a genuinely severe stress case — depreciation running roughly double its historical average, sustained for ten straight years — the euro investor still ends up with a positive return ahead of typical European rates. Under the more realistic assumption that the rupee just keeps depreciating at its own long-run pace, the outcome looks a good deal better than that, and broadly in line with a comparable European equity index.

None of this makes currency risk disappear. It’s a real cost. But “the rupee is falling, therefore don’t bother” skips the half of the equation where India’s growth differential has, historically, more than paid for it.

Myth 3: “Foreign investors are abandoning India”

Also true as a description of the first half of 2026, and also incomplete. FIIs did sell hard in that window — net outflows in the trillions of rupees, driven by high US Treasury yields pulling money back to developed markets and by the Iran-US conflict spooking sentiment. That part of the story is accurate.

What it leaves out is who was buying while foreigners sold: Indian domestic institutions — mutual funds, insurers, pension money — net-bought almost as much as the entire FII outflow over the same stretch, with a record month of buying in March 2026, the very month markets fell hardest. That’s not a one-off; it’s underwritten by a structurally growing base of retail SIP savings that keeps flowing in regardless of what foreign sentiment is doing. And by mid-June 2026, FIIs themselves had turned net buyers again, extending into a multi-week positive streak through early July, with markets touching ten-week highs as the geopolitical noise eased.

FIIs left. Domestic money more than filled the gap. Then FIIs came back. That’s a market that’s grown a second engine, not one that’s been abandoned.

Myth 4: “Geopolitical shocks will derail India anyway”

This one’s rarely said out loud but sits underneath most of the skepticism. India’s markets have, in fact, taken a beating from every major global shock of the past two decades — the 2008 financial crisis knocked the Sensex down more than 50%, COVID took the NIFTY down around 35–40% in weeks, the Iran-US war shock this March produced the worst monthly fall since COVID, and the 50% US tariff shock landed on top of all that in 2025.

The pattern that actually matters is the recovery time, and it’s been shrinking with each episode. 2008 took roughly four years to claw back to prior highs. COVID took eight months to round-trip and had tripled off its lows within four and a half years. The March 2026 shock stabilised within weeks, helped by that same wave of domestic institutional buying, and markets were back to multi-week highs within a few months. Through every one of these episodes, India’s IMF-projected growth trajectory barely moved — it’s still the fastest-growing major economy today, shocks included.

So what’s the honest conclusion?

Every one of these four objections starts from something real. The index has been flat. The rupee has fallen hard. Foreigners did sell. Shocks did hit. A credible case for India doesn’t pretend any of that away — I don’t think readers trust arguments that do.

But each complaint, examined fully rather than as a headline, turns out to be describing a symptom rather than a verdict. A flat index conceals dividends, sector rotation and record retail buying underneath it. Currency depreciation, real as it is, has historically been outrun by India’s growth differential. Foreign selling has been absorbed and then reversed by a structurally deeper pool of domestic capital than existed a decade ago. And the shocks, however sharp, have each been recovered from faster than the one before, against a growth backdrop that keeps outpacing every major peer economy.

None of that is a guarantee of future returns, and it shouldn’t be read as one — markets remain markets, and anyone allocating capital to India, or anywhere else, should size that decision to their own risk tolerance and time horizon, not to a blog post. But “there’s nothing here” is a harder case to make once you’ve actually finished the sentence.

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Sources: the figures above are drawn from IMF, World Bank, S&P Global, RBI, NSDL and NSE/BSE data current to July 2026. This is a personal analytical piece, not investment advice.

This piece first appeared on Medium and on LinkedIn.