The Nifty ended the financial year 2026 down over 5%, while the Sensex fell 7% near 72,000. Sensex hit a high of about 85,000 twice during the last two years. The correction can be put into perspective by recalling the talk of the index hitting 100,000. But, quite the opposite has taken place over this period.
Markets remained under sustained pressure through most of the calendar year 2025 due to tariff-related uncertainties, persistent foreign outflows, weak corporate earnings growth, elevated valuations and a weakening rupee. These factors collectively capped any meaningful upside, even during intermittent rallies.
The situation worsened toward the end of the financial year as geopolitical tensions escalated in West Asia following the Iran-Israel-US conflict. The flare-up triggered a sharp spike in crude oil prices, further complicating India’s macro outlook by raising inflation concerns and squeezing corporate margins.
At the same time, expectations of US Federal Reserve rate cuts were pared back significantly, tightening global liquidity conditions and adding to equity market stress.
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Foreign institutional investors played a central role in the market downturn. Over FY26, FIIs pulled out Rs 1.8 lakh crore from Indian equities, with a sharp acceleration in selling seen in the final quarter. In the three months ending March 2026 alone, outflows stood at Rs 1.31 lakh crore.
Pockets of strength in some areas were outweighed by steep declines across several key sectors. The Nifty IT Index dropped 21% amid concerns over a global slowdown, while new-age and digital businesses tracked by the Nifty India Internet Index fell 19%. Realty and tourism were among the worst hit, both plunging 23% as higher interest rates and demand concerns weighed on sentiment.Consumption-linked sectors also came under pressure, with FMCG down 15% and media falling 14%. Financials, typically market leaders, failed to provide support, with the Nifty Financial Services Index declining 6% and the Nifty Bank Index slipping 2%.
Also read: FY26 IPO market a disaster as investors lose money in 2 out of 3 issues. Will next year be better?
The result is a market that has seen time-based correction rather than sharp crashes alone, leading to negligible returns over a two-year horizon despite intermittent volatility.
How’s FY27 looking like
Looking ahead, the outlook remains cautious. According to Brickwork Ratings, FY27 is likely to remain a year of selective opportunities rather than broad-based rallies. Commodities could outperform, driven by infrastructure demand and geopolitical risk premiums, while equities may continue to face headwinds from global uncertainty and earnings pressures. Debt markets, meanwhile, are expected to offer relatively more stability.
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