India's financial markets are likely to remain supported by resilient domestic economic fundamentals in 2026-27, although heightened geopolitical uncertainty, elevated commodity prices and volatile foreign capital flows could continue to pose challenges, the Securities and Exchange Board of India (SEBI) said in its Annual Report 2025-26.The report said India's economy remained resilient during 2025-26 despite a challenging global environment, supported by robust domestic demand, government capital expenditure and a strong services sector. Real GDP growth was estimated at 7.7 per cent in 2025-26, accelerating from 7.1 per cent in the previous year. Private consumption and investment remained important growth drivers, accounting for 56.7 per cent and 31.9 per cent of nominal GDP, respectively.Looking ahead, however, the global environment is expected to remain uncertain. The report cited the IMF's projection of 6.5 per cent growth for India in 2026-27, compared with global growth of 3.1 per cent. India's relatively strong domestic fundamentals, fiscal consolidation, improving inflation dynamics, stronger corporate balance sheets and resilient domestic institutional investment are expected to support its relative outperformance. At the same time, a prolonged Middle East conflict and crude oil prices above USD 100 per barrel could widen the current account deficit and increase inflationary pressures.Indian equities faced a difficult 2025-26, with the Nifty 50 and broader indices declining around 14 per cent in US dollar terms. The weakness reflected sustained foreign portfolio investor (FPI) selling, rupee depreciation, valuation concerns, slower earnings growth and the impact of the Middle East conflict. Domestic institutional investors, particularly mutual funds, provided a significant cushion through robust investment flows.FPI equity outflows from India reached a record USD 19.7 billion during the year. However, SEBI noted that a restructuring of global supply chains could create new investment opportunities for India. A sustained resolution of the Middle East conflict and normalisation of energy prices would be among the most important near-term catalysts for a recovery in foreign flows.Commodity prices remain another key risk. The report highlighted that higher crude prices could raise India's import bill, widen the current account deficit and create upside risks to inflation. Strategic petroleum reserves, import diversification and targeted fiscal support are therefore expected to remain important for maintaining macroeconomic stability.SEBI's assessment points to a relatively favourable domestic backdrop, but one where market performance will remain closely linked to the trajectory of global geopolitical risks, energy prices and international capital flows.