Nifty50 ranks among weakest major benchmarks in 2026 amid foreign portfolio outflows

India’s benchmark index, the Nifty50, has emerged as one of the worst-performing major global benchmarks in 2026. The index declined 13.1 per cent year-to-date as of October 26, placing it among the weakest-performing indices globally.

Alongside equity declines, the Indian rupee depreciated 5.6 per cent against the US dollar. This currency depreciation has added further pressure on dollar-based investors, compounding their losses when converting returns back into US dollars.

The underperformance of Indian equities contrasts sharply with gains seen in other global markets. Taiwan’s TWSE gained 59 per cent year-to-date, South Korea’s KOSPI rose 29.8 per cent, and Brazil’s Ibovespa advanced 27.3 per cent. Meanwhile, Japan’s Nikkei increased by 23.5 per cent, and the US S&P 500 rose 11.4 per cent. Only Indonesia’s JCI recorded a worse performance than the Nifty.

Market analysts point to capital shifts toward East Asian markets, driven by artificial intelligence-led rallies, as well as higher US Treasury yields that make dollar-denominated assets more competitive. Madan Sabnavis, Chief Economist at Bank of Baroda, noted that foreign portfolio investor (FPI) selling has affected both indices and the currency, while earnings have only improved recently.

Data shows that the Nifty50’s price-to-earnings (P-E) ratio fell to 20.4 on October 26, down from 24.45 on December 31, 2025. This correction has narrowed India's valuation premium, though it has not eliminated it entirely. India’s P-E ratio is marginally higher than Japan’s Nikkei at 19.9, while trailing Taiwan at 26 and the US at 26.1.

Foreign portfolio investors net sold approximately ₹3.1 lakh crore from Indian equities during 2026 up to October 23. According to Chintan Hefa, Executive Director at Grant Thornton Bharat, this heavy selling, combined with elevated crude oil prices, has intensified currency pressures on the Indian rupee.

In contrast to the rupee's decline, currencies such as the Colombian peso, Brazilian real, South Korean won, and Chinese renminbi have appreciated year-to-date. While India's valuation correction has lowered price multiples, investors continue to weigh broader growth prospects and returns available in other international markets.

"The recent correction in the Nifty50 and the outflow of foreign portfolio investments highlight the sensitivity of emerging markets to global capital shifts and currency movements. While a lower price-to-earnings ratio reduces valuation pressures, founders and business leaders must recognize that investor sentiment globally remains tied to macroeconomic stability, currency resilience, and relative growth prospects. Navigating this environment requires a strong focus on core business fundamentals and sustainable earnings growth." — Dr. Shishir Gupta, Founder & CEO, StartupLanes