Why Is the Indian Stock Market Underperforming Compared to Its Asian Peers?
The Indian stock market that has been performing poorly in relation to its Asian counterparts over the past year has become a major issue of concern amongst the investors, reflecting broader trends seen in India Current News. Major Asian markets such as China, Japan, South Korea, and Taiwan, while posting high returns in the dollar in the year 2025, India was trailing behind with a low performance. Increased selling by foreign investors, falling of the currency, international interest rates changes, and slowing down of key trade deals have all taken a toll on Indian stocks. Despite the country being sound in its domestic fundamentals, global and macro economic forces over a short period of time have developed a rift between India and the rest of the Asian countries.
Global Factors Driving Underperformance
Among the key factors that have led the Indian stock market underperforming compared to its Asian peers markets is the increased Foreign Institutional Investor (FII) apprehension. At the beginning of December, the FIIs sold faster as the world risk-off mood was in effect. Increasing yields on Japan bonds brought about worries of the selling off of the yen carry trade bringing about profit selling in the new Asian markets.
The 10-year bond yield in Japan soared near to 2% which made the safe assets more attractive and cut down the capital inflows into the risky markets such as India. At the same time, China, South Korea, and Taiwan, which were relatively good peers, were enjoying good tech-led rallies and policy backlash, recording much higher dollar returns. India, in its turn, contributed only approximately 10% dollar payoff, with this being partly wiped out by nearly 6-percent weakening of rupee.
India-Specific Challenges
The Indian stock market underperforming compared to its Asian peers story has been further enhanced by domestic reasons. The Indian rupee fell to historic lows of above 90 per dollar, adding to volatility and drying investor confidence. There has been an increasing trade deficit due to declining exports and uncertainty over the India US trade deal which has put strain on both the currency and equities.
The long-term delay in the concluding trade agreement with the US, which is the largest export destination of India, has been a cause of concern of growth in the corporate earnings in the year 2026. This risk is not yet fully priced in current valuations which scares markets. Also, the premium values of the Indian stocks over the other emerging markets have been high thus rendering the FIIs to be more selective.
What Could Improve Market Performance
The situation is not that bad despite existing weaknesses. Some stabilization is anticipated by the analysts with seasonal pressure on the current account deficit being relieved especially when the gold imports are reduced because of the festivity. The US Federal Reserve rate cut was a temporary measure, yet the case remains unclear on whether global liquidity will be provided in the long run.In future, the picture in India may be better in 2026 in case two conditions are met: a turnaround in the selling of FII when valuation normalises, and a turnaround in corporate earnings beginning in late 2025. Above all, the India-US trade agreement development, particularly, the Phase 1 results may contribute greatly to the mood and may turn the tide of the Indian stock market underperforming compared to its Asian peers.
