International brokerage firm Nomura has changed its view on the Indian equity market. The firm has reduced India’s rating from ‘overweight’ to ‘neutral’. The main reasons behind this big decision have been said to be the rising prices of crude oil due to Iran war, withdrawal of foreign funds and changing equations of technology (AI) in the global market.
foreign brokerage alert
Nomura believes that the ongoing global economic and geopolitical turmoil can have a direct impact on the valuations of Indian companies. Due to this concern, he has reduced the target of Nifty for December 2026 from 29,300 to 24,900. Nifty has already seen a decline of about 11 percent since the war started on February 28. Other leading institutions like Goldman Sachs and UBS had also recently advised to exercise similar caution regarding Indian markets. To secure their portfolio, Nomura has suggested investors to turn to the markets of South Korea and China.
Iran tension spoiled the game
India depends largely on imports for its energy needs. In such a situation, the ongoing war in Iran and the Middle East has a direct impact on our economy. Nomura’s report makes it clear that due to disruption of oil supply through the Strait of Hormuz, crude oil prices may remain high for a long time. When energy is expensive, companies’ costs increase, putting pressure on their profits. Foreign investors are very sensitive to these potential risks.
The world of investment is changing
Today, a new investment revolution is going on all over the world regarding Artificial Intelligence (AI). Nomura estimates that some other Asian markets are currently benefiting more directly from the global AI boom than India. The brokerage has identified the Indian market as an AI “have-not” in its report. This is the reason why foreign investors are now giving preference to South Korean markets, which are considered technologically strong, where the 15 percent decline after the war has created attractive investment opportunities.
Domestic investors are the real shield of India
Even though foreign brokerages are downgrading the ratings, the most positive aspect in this whole picture is the unwavering confidence of Indian retail investors. Since the end of September 2024, foreign investors (FIIs) have made a huge withdrawal of about $ 61.2 billion from the Indian market. Despite this, our market did not fall apart like a deck of cards. The entire credit for this goes to the common investors of the country, who have put funds worth about $60 billion in the market through SIP and lump sum investment. Nomura has warned that this domestic investment may reduce somewhat if returns from the market slow down. Nevertheless, the consistently strong SIP figures prove that Indian investors are no longer fazed by minor market downturns and are banking on India’s growth story with a long-term view.