Indian financial markets have struggled this month as the world’s worst COVID-19 crisis engulfs the country but international investors are betting the economy will rebound quickly once the pandemic has passed. Data shows that more foreign investment money has left India this month than came in during the whole of the first quarter, as a catastrophic spike in deaths leaves the world’s second most populous country in turmoil. Before the upsurge, the International Monetary Fund, banks and ratings agencies were all predicting an impressive double-digit rebound in growth this year, but many of those forecasts will now have to be ripped up. JPMorgan’s Indian economists have slashed their Q2 GDP estimates to a seasonally adjusted -16% quarter-on-quarter from 6.5% and still see risks of a larger stumble if the health crisis continues unabated. Citi sees a “significant” chance it will have to cut its forecasts too, while credit rating agency Fitch estimates the government’s fiscal deficit will nearly double to 14% of GDP this year and push India’s debt-to-GDP ratio over 90%. “It is a really sad situation,” said Lombard Odier’s emerging market FX strategist Kiran Kowshik, adding that the crisis was being compounded by India’s weak health system and the fact that many workers in informal sectors need to able to get around to make a living. The Indian rupee has been one of the world’s worst performing heavyweight currencies this month, down nearly 2%. Indian stocks have underperformed the big global indexes by nearly 7% and those in Brazil, which has also in the grip of a serious COVID-19 surge, by nearly 12%. Including bond market selling, Societe Generale estimates international investors have yanked out over $6 billion from India in April. But with new targeted lockdowns, the government reining in vaccine exports, and ventilators and other support now arriving from abroad, Mumbai’s $2.4 trillion Sensex stock index has recovered some ground and the rupee is heading for its best week since August. “Prime Minister Modi, and the partial structural reform hopes he represents for investors, is neither sufficiently vulnerable politically, nor are Indian equities sufficiently expensive relative to history, to throw the towel in on what remains the best country pick in large emerging markets,” said Hasnain Malik, head of equity research at Tellimer.