Why are markets cool though GDP is hot?

A mix of reasons, both domestic and foreign, is keeping market enthusiasm on GDP numbers muted

- Monika Halan

India’s Gross Domestic Product (GDP) print for the second quarter of the financial year 2025-26, at 8.2%, points to a full-year GDP growth rate of around 7.5% — making India the fastest-growing large economy in the world.

While GDP is hot, Indian stock markets have been cool for a year, with the Nifty50 one-year return at less than 8% — masking a concentration of return in a few large-cap stocks while the rest have fallen or stayed flat. While GDP growth eventually translates into stock-market returns, what we see right now is a mix of factors that has left secondary markets unimpressed by the growth numbers.

Economists look at two numbers when it comes to GDP growth — nominal and real. The nominal growth, or the value in rupee terms of all goods and services produced in the country, is deflated by an inflation deflator to remove the impact of price rise from the real economic activity to arrive at the real GDP growth print. It is important to remove price inflation so that the real GDP rise is visible, not just the rise in GDP due to a rise in prices. Is the rise in GDP due to a real rise in output or just price escalation? This question is answered when we look at real versus nominal GDP.