These issues intensified further with the escalation of the Iran-Israel/US conflict a month ago, triggering a spike in energy prices, accelerated foreign outflows, and reduced expectations of US Fed rate cuts to just one from earlier projections of multiple cuts.
Investor wealth eroded by Rs 1,34,414 crore as of March 30, 2026, the last trading day of the current financial year. The all-India market capitalisation of BSE-listed companies fell from Rs 413.75 lakh crore (March 28, 2025) to 412.41 lakh crore.
Sectoral snapshot
Sectoral performance in FY26 reflected a sharp divergence across pockets of the market, with only a handful of indices managing to deliver positive returns while the majority ended in the red. Leading the pack was the Nifty PSU Bank Index, which surged 27%, emerging as the clear outperformer for the year.It was followed by the Nifty Metal Index with gains of 23%, supported by firm commodity trends, and the Nifty India Defence Index, which rose 13% amid sustained policy push and order inflows. The Nifty Auto Index also posted a healthy 12% rise, while the Nifty Pharma Index and the Nifty Oil & Gas Index delivered modest gains of 6% and 3%, respectively.
On the flip side, broader market weakness was evident in several key sectors. The Nifty Bank Index slipped 2%, underperforming PSU peers, while the benchmark Nifty 50 declined 5%. Financials overall remained under pressure, with the Nifty Financial Services Index falling 6%. Rate-sensitive and consumption-driven segments saw sharper corrections, as the Nifty FMCG Index dropped 15% and the Nifty Media Index fell 14%.
The worst-hit pockets were high-growth and cyclical sectors. The Nifty IT Index tumbled 21% amid global slowdown concerns, while the Nifty India Internet Index declined 19%. Deep cuts were also seen in the Nifty Realty Index and Nifty India Tourism Index, both of which plunged 23%, reflecting pressure from higher interest rates, demand concerns and risk-off sentiment.
India VIX
The markets remained volatile through the year, as the fear index India VIX, shot up 120% in the past year. Today, it closed at 27.89.
FII outflows
Foreign institutional investors sold domestic equities worth Rs 180,834 crore between April 2025 and March 2026. In the three-months ended March 30, 2026, FIIs offloaded shares worth Rs 1,31,122 crore.
Rupee’s performance and FY27 outlook
INR’s performance against the US dollar grabbed headlines as the rupee was among the worst performing emerging market currencies.
The rupee typically sees an average annual depreciation of around 5%, but this financial year it has already weakened by nearly 11%, said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
“The outlook for FY-27 looks weak with RBI having > 100 mio import positions while the war continues and Strait of Hormuz remains closed. If the war ends and FPI selling ends looking to oversold Sensex and Nifty and Bank Nifty we may find FPIs returning back to the market but we need oil at $80 a barrel for that and also Strait of Hormuz open so that our exports can go along with our imports,” Bhansali said.
In his view, the currency could stabilise with a more modest 2–3% depreciation if the ongoing conflict eases but may slide aggressively towards the 100 mark in the event of further escalation.
FY27 Outlook
FY2026 underscored the challenges of an uncertain and volatile global macro environment, with equity markets underperforming owing to President Trump’s tariffs from the first quarter onwards, and a sharp crude oil price spike due to supply disruptions in the fourth quarter, driving cost inflation and weighing on corporate margins, Vikrant Chaturvedi, Associate Director – Research, Brickwork Ratings said.
He expects commodities to outperform in FY2027, with base metals driven by infrastructure demand, precious metals acting as safe havens, and oil & gas supported by geopolitical risk premiums. “Equities face continued headwinds, while debt markets should offer relative stability. FY2027 will be a year of selective but constructive performance across asset classes,” Chaturvedi said.
Rajesh Singla, CEO & Fund Manager at Alpha AMC expects earnings growth to stabilise in the low double-digit range in FY27, supported by domestic demand and continued capex momentum.
He also sees a clear shift in the small-cap space following a sharp valuation correction from overheated levels in 2024. “This has improved the risk-reward balance so institutional investors are starting to increase exposure again. Fund houses reopening small-cap schemes and selectively adding positions signals that confidence is returning though in a more measured way. Historically, such corrections have often been followed by strong recoveries, but this time the approach is far more selective. Not all companies will benefit equally,” Singla said.
In his view, IT Services, OMCs, airlines, cement and export-oriented segments will continue to witness pressure.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)