MUMBAI, India — October 12, 2026 — India’s battered stock market could be approaching a major turning point if the war involving Iran comes to an end, according to Amundi Investment Institute, the research arm of one of the world’s largest asset managers.
Despite months of falling share prices, heavy foreign investor withdrawals and an energy crisis that has pushed oil prices higher, Amundi sees reasons for renewed optimism about India’s economic and financial outlook.
Alessia Berardi, head of global macroeconomics and emerging markets strategy at Amundi Investment Institute, said an end to the Middle East conflict could become a pivotal moment for Indian stocks.
Speaking during an interview in Mumbai last week, Berardi highlighted improving private investment and stronger economic data as reasons to believe India’s market could recover once external pressures begin to ease.
The assessment comes after a difficult year for investors.
India’s benchmark Nifty 50 Index has fallen nearly 14% in 2026, while foreign investors have withdrawn more than $30 billion from the country’s equity market, according to Bloomberg.
Yet the economic picture is considerably stronger than the stock-market performance might suggest.
India’s economy grew 7.8% in the June quarter, and the Reserve Bank of India recently upgraded its full-year growth forecast to 7.1%.
The biggest question is whether the end of the Iran war could finally convince foreign investors to return to India — or whether inflation, high interest rates and currency weakness will continue holding back a recovery.
Amundi Sees a Turning Point for Indian Stocks
Amundi’s cautiously optimistic outlook contrasts with the widespread pessimism surrounding Indian equities.
Berardi believes that much of the negative sentiment reflects the effects of external developments rather than a fundamental breakdown in India’s economic growth prospects.
She pointed to encouraging signs in private investment and other economic indicators.
For international investors, a durable end to the war could remove one of the most important sources of uncertainty affecting the country.
India imports a large proportion of the oil it consumes, making it particularly vulnerable to changes in global energy prices.
If the conflict ends and international oil supplies stabilize, India’s import costs could decline.
That could ease inflationary pressures, improve confidence in the rupee and reduce concerns about the country’s external financial position.
However, the war’s end would not automatically guarantee a stock-market rally.
The scale of any recovery would depend on oil prices, international investment flows, corporate earnings and monetary policy.
Why the Iran War Has Hit India So Hard
The Iran war has created significant economic difficulties for major energy-importing countries.
The conflict escalated in late February 2026 and disrupted shipping through the Strait of Hormuz, one of the world’s most important oil transportation routes.
The resulting supply uncertainty pushed crude prices higher and increased costs across energy markets.
India has been especially exposed because it relies heavily on imported petroleum.
Higher oil prices can increase the cost of transportation, industrial production and consumer goods.
They can also raise India’s import bill, creating additional demand for US dollars.
That pressure can weaken the rupee and make imported energy even more expensive in local-currency terms.
For companies, higher fuel and logistics costs can squeeze profit margins.
For consumers, rising energy prices can reduce disposable income and weaken spending on other goods and services.
The result is a difficult environment for stock-market performance even when the domestic economy continues growing.
Nifty 50 Falls Nearly 14% as Foreign Investors Exit
The benchmark Nifty 50 Index has declined almost 14% during 2026, making India one of Asia’s weaker major stock markets.
The downturn reflects several overlapping concerns.
Elevated oil prices have increased inflation risks and weighed on corporate earnings expectations.
Foreign investors have withdrawn more than $30 billion from Indian shares.
Meanwhile, relatively high valuations in some sectors have made investors more selective.
Currency weakness has also reduced returns for overseas investors whose performance is measured in dollars.
When the rupee depreciates, foreign investors can suffer exchange-rate losses even when the underlying Indian share price remains unchanged.
The combination of weaker market sentiment and sustained foreign selling has placed pressure on large-cap stocks.
However, the broad index’s weakness does not mean every part of the market has declined equally.
Certain sectors, particularly those linked to domestic industrial investment, have performed more strongly.
Defense Stocks Emerge as a Major Bright Spot
One of the areas Amundi finds attractive is India’s defense industry.
Berardi favors companies linked to defense and manufacturing, sectors that have benefited from government efforts to expand domestic production.
According to Bloomberg, an index of Indian defense stocks has gained more than 16% during 2026.
That performance stands in sharp contrast to the broader Nifty 50’s decline.
India has been working to strengthen domestic military production, reduce dependence on imported equipment and expand its defense manufacturing capabilities.
Government procurement programs can create opportunities for companies involved in electronics, aerospace, shipbuilding, machinery and related technologies.
However, strong recent share-price performance does not guarantee continued gains.
Defense companies can face valuation risks, delays in government contracts, production challenges and changes in spending priorities.
For investors, the key issue is whether future earnings can justify current market expectations.
Manufacturing Could Become India’s Next Growth Engine
Amundi also sees opportunities in companies connected to India’s manufacturing expansion.
The country has been seeking to strengthen domestic industrial capacity and attract investment in production facilities.
Government infrastructure spending, private investment and supply-chain diversification are contributing to the sector’s longer-term prospects.
India’s efforts to develop manufacturing also reflect a broader international trend.
Companies are increasingly examining ways to diversify supply chains and reduce excessive dependence on individual countries or production centers.
India could benefit from that shift if it continues improving infrastructure, workforce skills and the business environment.
However, manufacturing expansion requires sustained investment.
High borrowing costs, energy prices and global trade uncertainty can make new projects more expensive.
That is why lower oil prices and improved financial conditions could become important factors supporting future growth.
India’s Economy Is Growing Faster Than Its Stock Market Suggests
One of the strongest arguments behind Amundi’s optimism is India’s continuing economic expansion.
The Reserve Bank of India recently raised its growth forecast for the current financial year to 7.1%, compared with its previous estimate of 6.7%.
The revision followed stronger-than-expected economic activity.
India’s gross domestic product expanded 7.8% in the June quarter from a year earlier.
The figures indicate that domestic demand and investment have remained comparatively resilient despite external pressures.
However, economic growth and stock-market performance do not always move together.
Share prices reflect expectations about future earnings, financing costs, currency movements and the prices investors are willing to pay for businesses.
A country can record strong GDP growth while its stock market struggles because companies face margin pressures or their shares were previously expensive.
That distinction is central to the argument that India’s current equity weakness may have become excessive.
Amundi’s Investment Chief Also Sees Reasons for Optimism
Berardi’s assessment is consistent with comments from Amundi’s broader leadership.
Vincent Mortier, the group’s chief investment officer, told The Economic Times in an interview published October 12 that negative sentiment toward India may be overstated.
Mortier argued that Indian valuations have become more reasonable after an extended period of market weakness.
He also highlighted the potential for foreign investors to return as international economic conditions improve.
In a separate interview published by Mint, Mortier pointed to India’s economic fundamentals and suggested that easing geopolitical tensions could support investment flows.
These assessments strengthen the case that Amundi’s constructive view is not limited to one strategist.
However, they remain investment judgments rather than confirmed forecasts.
Market conditions could change substantially if the Middle East conflict escalates or inflation remains elevated.
Oil Prices Remain a Major Obstacle
A potential recovery in Indian equities will depend partly on whether international energy prices decline sustainably.
On October 12, Brent crude was trading around $103.38 per barrel during Asian market hours, according to Reuters.
Although prices retreated during the session, crude remained elevated compared with levels that would place less pressure on import-dependent economies.
Amundi’s October global investment outlook forecast that Brent could ease toward $80 per barrel by early 2027.
That is a projection, not a guaranteed price target.
The actual outcome will depend on geopolitical developments, physical supply conditions, global demand and production decisions.
If oil prices remain above $100 for an extended period, India’s inflation and import-cost challenges could persist.
But a sustained decline could provide relief to manufacturers, consumers and policymakers.
Interest Rates Could Determine the Recovery’s Strength
India’s central bank is also dealing with pressure from inflation and currency volatility.
The Reserve Bank of India raised its benchmark policy rate in early October as price pressures intensified.
Higher rates can help control inflation and support confidence in the currency.
But they can also increase borrowing costs for households, companies and the government.
Reuters reported on October 12 that Indian mutual funds had been selling government bonds as investors adjusted to the prospect of a prolonged period of tighter monetary policy.
The bond-market selloff demonstrates that financial conditions remain challenging even as some equity strategists become more optimistic.
For Indian stocks, a less restrictive rate outlook could strengthen the recovery case.
However, if inflation persists, the RBI may have limited room to support growth through lower borrowing costs.
Domestic Investors Are Supporting the Market
Despite heavy foreign selling, Indian mutual fund investors have continued directing money toward domestic equities.
According to a Jefferies analysis reported by The Financial Express, monthly mutual fund inflows averaged approximately ₹38,800 crore during 2026.
Those flows have helped absorb some selling pressure.
However, they have not been sufficient to produce a broad market recovery.
Large equity issuances, foreign withdrawals and weaker investor sentiment have continued to weigh on prices.
The divergence highlights an important characteristic of India’s financial markets.
Domestic investors are becoming increasingly significant, but international capital flows can still strongly influence valuations and exchange rates.
A renewed increase in foreign buying, combined with continued domestic investment, could provide stronger support for the market.
Yet the timing of any such shift remains uncertain.
Foreign Investors May Be Waiting for Greater Stability
Foreign portfolio investors consider several factors when deciding whether to increase exposure to India.
These include corporate earnings growth, share valuations, currency stability, interest rates and geopolitical risks.
The Iran war has complicated that assessment.
High oil prices raise concerns about inflation and India’s external position.
Currency depreciation can reduce foreign investors’ dollar-denominated returns.
Higher borrowing costs can also make equities less attractive relative to bonds and other assets.
An improvement in these conditions could encourage international investors to reconsider Indian shares.
However, the end of the war would not automatically reverse more than $30 billion in withdrawals.
Foreign investors would still assess whether stock valuations offer attractive risk-adjusted returns.
Could the End of the Iran War Trigger a Rally?
Amundi’s argument rests on the possibility that the end of hostilities would remove several pressures simultaneously.
Lower oil prices could reduce the import bill.
Easing inflation could improve confidence in monetary policy.
A more stable rupee could reduce exchange-rate concerns.
Stronger corporate margins could support earnings expectations.
And improved investor sentiment could encourage renewed foreign buying.
Together, these developments could create more favorable conditions for Indian equities.
But the recovery would depend on the nature and durability of any peace agreement.
A temporary ceasefire that leaves shipping routes uncertain might provide less economic relief than a lasting settlement that restores normal energy flows.
There is also no guarantee that oil prices would fall immediately or by a particular amount.
For investors, the distinction between diplomatic progress and restored physical supply is important.
The Bigger Question: Is India’s Market Weakness Creating an Opportunity?
The divergence between India’s economic growth and financial-market performance is attracting renewed attention.
The economy continues expanding at a relatively strong pace.
Private investment and manufacturing activity offer potential opportunities.
Defense stocks have outperformed the broader market.
Yet the Nifty 50 has fallen sharply, and foreign investors have withdrawn substantial capital.
For Amundi, that disconnect suggests the possibility of a rebound if the external environment improves.
But the risks are substantial.
Oil prices could remain elevated.
Inflation could force borrowing costs higher.
The rupee may face additional selling pressure.
And corporate earnings may not recover as quickly as investors hope.
The end of the Iran war could remove one of the biggest obstacles facing India’s markets, but it would not eliminate every challenge weighing on the economy.
The durability of any recovery would ultimately depend on investment, earnings, inflation and international capital flows.
For now, India’s economic growth remains more resilient than its stock-market performance.
That contrast is creating a debate over whether investors are underestimating the country’s long-term potential.
Amundi sees the end of the Iran war as a possible turning point for India’s battered stock market — but the bigger test is whether cheaper oil, returning foreign capital and stronger corporate earnings can turn that optimism into a sustained recovery.
