India's Market Paradox: Strong Economy, Weak Performance – What's Driving It?

• Massive equity supply from IPOs and stake sales (₹5.5 lakh crore) overwhelms demand, causing FPIs to net sell $18 billion.
• Investor "capitulation" and emotional selling, especially in small-caps, fueled by frustration and rupee depreciation.
• Rupee is the worst-performing currency despite strong economic data, with global uncertainty and delayed US-India trade deal impacting sentiment.
• Market experiencing a necessary "froth unwinding" and correction in overvalued segments like electronics manufacturing and inflated IPOs.
• Despite current struggles, strong underlying economic fundamentals and rising earnings estimates point to a market "reset" and recovery by 2026.

Why It Matters: Indian markets struggle due to supply, sentiment, and currency, but strong fundamentals suggest a 2026 recovery.