The ongoing economic war between the USA and other countries has led to a great money imbalance throughout the world. However, India’s stock market is thriving despite a 50% tariff imposed by the US government. Since last year, foreign investors have been hesitant to invest in the Indian market. So, how is India still able to thrive? In this article, we will share the secrets behind achieving stock market growth.
In This Article
Role of Domestic Investors
For a long time, foreign investors had control of the Indian stock market. Today, this figure has come down to 16%. Mutual funds, insurers, and individual investors are filling the gap created by foreign investors.
Many investors just automate their deposits into mutual funds and let the market play its role in bringing the profit. Is there any other choice? No! Domestic investors are pushing the market growth, and the coming times are going to stay in favor of the Indian economy.
Not very long ago, the typical Indian saver would put money into a fixed deposit, purchase a small bit of gold, or perhaps invest in real estate if the family budget permitted it. Stocks seemed like a casino, risky and daunting.
But something shifted post-pandemic. Indians sitting at home with smartphones and access to investment apps started posing a new set of questions:
- Why am I only getting 2–3% interest when inflation is devouring more than that?
- Why should I wait eight years to lay hands on my own money when the market provides flexibility and growth?
This revolution from scarcity mentality (“don’t lose what you have”) to growth mentality (“make your money work for you”) has been nothing short of revolutionary. It is symptomatic of a deeper psychological shift: individuals are no longer saving to survive, but investing to thrive.
The Rise of Systematic Trust
Part of the reason this trend has remained so durable is automation. Investors aren’t stuck to their television sets watching CNBC or reading every communication from international fund managers. Rather, they are creating systematic investment plans (SIPs) and allowing compounding to do its silent magic.
This is an indicator of a fundamental principle of money psychology: consistency trumps timing. While foreign institutional investors jump in and out based on international breeze, Indian families are discovering the virtue of holding on. It’s a change in mindset that’s long-term — from following headlines to believing a system.
Stories Behind the Numbers
Consider the example of Tathagata Banerjee, a professor of literature from Kolkata. His savings were primarily in government bonds until 2020. When Covid-19 struck and markets plunged, he did not act in panic. What he did is the oldest principle of investment — “buy low, sell high.”
In a year, his portfolio had increased by 40%. Today, he earns around 21–22% per annum, much more than his savings account could have provided. More significantly, he’s found what psychologists refer to as loss aversion in reverse: rather than being afraid of volatility, he now dreads missing out on opportunity.
Financialization of Indian Savings
Economists term this as the financialization of savings — money previously tied up in real estate or gold is now pouring into stock and mutual funds. But on a psychological note, it’s also about identity. To invest in the stock market is to be a part of India’s growth story. It’s not only about safeguarding wealth anymore, but about belonging to an ascending nation. Even when tariffs slam exporters, investors see resilience in listed companies and bet on long-term growth.
The Psychology of Resilience
A foreign company is volatile. It exists when China appears to be in flames or when trade wars become a threat. But domestic investors are reflecting a new type of resilience — a mix of:
- Optimism bias: being pragmatic that India’s growth tale will persist.
- Anchoring: concentrating on consistent SIP investment instead of daily fluctuations.
- Self-efficacy: the sense of “I am capable of this, even using just a smartphone app
It’s this psychology that can account for why the Sensex and Nifty hardly flinched when U.S. tariffs struck last month.
What does this mean for the Future?
With more than 200 million brokerage accounts in India today, one in every seven Indians, the ride has only started. The wealth mentality is spreading at a faster pace than ever. And unlike foreign investors who are seeking yield, Indian investors are driven by something more profound: a desire for their money to grow along with their country.
Prime Minister Modi might speak of purchasing Indian merchandise out of national pride, but to a lot of small investors, the motive is simpler: common sense. Why pursue saturated foreign markets when India’s narrative is yet to be written
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Final Thought
Tariffs, trade wars, and foreign exits might be the headlines. But beneath it all, India’s middle-class investors are slowly redefining the market rules. Their psyche, one that is based on patience, faith in growth, and confidence, could be the country’s best economic defense. Because ultimately, the strongest market force isn’t policy or politics. It’s the attitude of millions who’ve decided to let their money grow, not just collect dust.
Reference: https://www.nytimes.com/2025/09/08/business/india-stocks-investors-trump.html
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People also ask
How do tariffs affect domestic investors and the flow of money in the economy?
Tariffs — especially on imported goods or raw materials — create ripple effects in the economy: they raise costs for import-reliant businesses, reduce profitability for exporters, and increase uncertainty. Domestic investors may respond by shifting money into safer assets or domestic-facing companies. For example, higher tariffs can make local manufacturers more competitive, attracting domestic investment, while hurting sectors that depend on global supply chains. This shift changes where capital flows, how quickly funds move, and which industries attract money.
This means for individual investors it’s vital to watch how tariff changes can re-price entire sectors and redirect investment flows.
Why are domestic investors in countries like India increasingly important in the face of global tariff shocks?
Domestic investors play a stabilising role when global capital becomes volatile due to trade or tariff tensions. In India, for instance, despite rising global tariffs and export pressure, strong domestic investor participation has helped keep markets resilient.
When foreign investment slows or retards because of global uncertainty, domestic capital can provide continuity, help maintain liquidity and support firms’ financing. That means for you, as a reader, the domestic investor base offers a buffer — but you should still track where the money is going, and whether it’s being shifted into sectors insulated from tariff shocks (e.g., domestic services vs export manufacturing).
What practical steps should individual investors take when tariffs and domestic investor flows are disrupting money movement?
Great question — here are pragmatic actions you can take:
Review your portfolio’s exposure to export-heavy or import-heavy industries. Tariffs can hit these hard.
Shift part of your investments into domestic-oriented sectors (companies whose revenue comes mainly from the local market rather than global trade).
Monitor government trade policy announcements and tariff changes — they’re not just macro-news, they affect your savings.
Diversify geographically and by asset class — if money is moving away from certain flows, you’ll want to be in areas still receiving investment.
Stay aware of inflation and currency effects. Tariffs can drive inflation or currency weaknesses, which erode real returns.
By doing so, you don’t just react to disruption — you make your portfolio more resilient to the shifts in where money flows.
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