India’s markets faced a $1.5 billion reckoning as global investors staged their fiercest retreat since the COVID-19 pandemic, triggered by a Pakistan-linked drone strike near Jammu that reignited fears of a prolonged Indo-Pak conflict. The rupee careened to an unprecedented 86.50/USD, while Credit Suisse sounded alarms over India’s growth prospects, slashing its FY26 GDP forecast to 5.8% and cautioning that unchecked capital flight could spiral into stagflationary chaos—a nightmare scenario of stagnant growth and runaway inflation.
India’s markets faced a $1.5 billion reckoning as global investors staged their fiercest retreat since the COVID-19 pandemic, triggered by a Pakistan-linked drone strike near Jammu that reignited fears of a prolonged Indo-Pak conflict. The rupee careened to an unprecedented 86.50/USD, while Credit Suisse sounded alarms over India’s growth prospects, slashing its FY26 GDP forecast to 5.8% and cautioning that unchecked capital flight could spiral into stagflationary chaos—a nightmare scenario of stagnant growth and runaway inflation.
Investor Exodus:
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Equities: FPIs sold ₹8,700 crore ($1.05B) in blue chips like Reliance and HDFC Bank.
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Debt: Sovereign bond yields hit 8.1% as foreign holdings dropped to 16-month lows.
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Alternatives: Gold ETFs saw ₹2,000 crore ($240M) inflows amid panic.
