India has for years battled high levels of inflation which has in many ways kept the country from realizing its full economic potential. Over the last year though, basically since the price of oil stopped going up, Indian inflation has remained tame. As global growth has continued to muddle through, the further collapse of the price of oil has been a major tailwind for India since global growth has not collapsed in lockstep. Despite what the central banks of the world would have us believe, deflation can be a great thing, especially deflation in such a widely used and imported product as oil for the Indian economy.
The first chart below shows the India wholesale price index (blue line, right axis) overlaid on the relative performance of the MSCI India vs the MSCI All Country World Index (red line, left axis). It's clear that India's outperformance started in full force when wholesale prices topped out at the end of 2013 (the grey vertical line).
This next chart shows the relative performance of the MSCI India vs the All Country World Index (red line, right axis) overlaid on the price of Brent crude oil. In this chart we get an even clearer picture of precisely when the Indian stock market started it's outperformance trend. We've put a black reference line showing the oil price peak at the end of 2013 and it lines up perfectly with the beginning of India's outperformance. In this chart the grey line still marks the peak of Indian wholesale prices.
Just for good measure, here is another chart showing the relationship between Indian wholesale prices and oil. It's a strong relationship and the economic backdrop of muddle through is significantly different from the last time oil collapsed in 2008. This time global growth is not collapsing and the fall in oil is a boon for oil importers.