I remember seeing my college seniors go on fabric hunts and sourcing trips to Shanti Mohalla. It was always very exciting to see what they came back with and how they designed their collections with this haul.
Shanti Mohalla, is one of the best fabric markets located in Delhi. A lot of designers and boutique labels source their fabrics from this very famous market. You can find everything from rainbow coloured chiffon here, to t-shirt material/knitwear fabric.
However, it is advisable to go here during the day because the area does have a bit of a notorious reputation. It gets quite crowded, the streets are narrow, and almost every vehicle can and will try to barge in to get through. That said, the stuff you'll find here is totally worth the trip.