Indian equities lag despite robust economic expansion

A correction in investor expectations followed by re-rating of Indian equities could trigger a sharp rally in the market if the underlying economic strength translates into earnings growth or if foreign capital flows resume on improved valuations.

Continued divergence between GDP growth and equity performance would likely keep Indian equities in a holding pattern, with emerging market allocators treating the market as a value trap rather than a growth opportunity and rotating capital elsewhere.

If the equity underperformance reflects deteriorating corporate profitability, margin compression, or capital flight that the headline GDP figures mask, a deeper selloff could pressure broader emerging market sentiment and complicate India's financing needs.