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Uncertainty around the US–Iran ceasefire and weak medium-term earnings guidance from IT majors sparked a sharp sell-off in domestic equities, even as other Asian markets presented a contrasting picture.
Both the Nifty 50 and Sensex plummeted approximately 2% this week, snapping a two-week winning streak, and marking their worst weekly performance in nearly a month.
On Friday, the Nifty 50 fell for a third straight session, declining 1.1% to close at 23,897.95, breaking below the key 24,000 support level. The Sensex mirrored this retreat to end at 76,664.21.
In contrast, Asian markets thrived through the week. South Korea’s Kospi gained 4.6%, while Taiwan’s Taiex rose 2.5%, lifted by a global artificial intelligence (AI)-semiconductor rally that has largely bypassed India.
Foreign portfolio investors remain cautious on India, as Brent crude prices staying above $100 a barrel strains the economy given the country imports about 88% of its oil, said Chanpreet Singh, smallcase manager and founder at AltQube, a wealth advisory firm.
He added that a falling rupee erodes dollar returns, especially since the long-term capital gains tax hike to 12.5% in 2024 has permanently raised their hurdle rate. The Indian rupee has hit a rough patch and has weakened nearly 5% against the dollar so far this year, currently trading at ₹94.18 per dollar.
Until crude cools and the rupee stabilises, FPI flows are likely to remain selective, leaving India at risk of underperforming other major emerging markets, said Singh. “India can win it (FPI flows) back with a valuation reset or a credible domestic AI narrative, not macro stabilisation alone,” he added.
That gap in India’s AI narrative was played out in this week’s sectoral performance. IT emerged as the top laggard, with the BSE IT index tumbling nearly 10%, as concerns shifted beyond near-term earnings to deeper structural risks.
Infosys’s management commentary around AI-led efficiencies points to a deflationary shift in traditional IT services, where automation is compressing deal sizes and pricing power, prompting the market to reprice medium-term margin risks more aggressively.
Meanwhile, geopolitics weighed on cyclicals, with auto and metals falling 3% and 2%, respectively, reinforcing an ongoing shift toward defensives.
Experts noted that as temperatures crossed 40°C across several Indian states this month, a surge in energy demand pushed investors toward power stocks, which gained about 4% and emerged as top performers this week.
Fast-moving consumer goods stocks also rallied 2% over three sessions after Nestlé India reported a solid 27% jump in net profit in the March quarter. Experts noted that this week’s sectoral rotation was driven primarily by earnings, with geopolitical tensions acting as a reinforcing factor.
Only 122 companies have reported Q4 FY26 earnings so far, and the numbers reveal a worrying divergence.
These early movers reported an 8% year-on-year rise in net profit, marking a significant recovery from the previous quarter’s near 2% fall. But their top line fell 3%, staging a sharp reversal from the robust 17% revenue surge witnessed in the previous quarter.
However, Ashwini Shami, president and chief portfolio manager at OmniScience Capital, is optimistic that a strong financial sector, resilient domestic consumption, and early signs of rural demand recovery might fuel double digit earnings growth for Q4 FY26.
Markets are expected to remain under pressure amid global weak cues. Going forward, persistent overseas outflows and any signs of earnings weakness could add pressure on an already fragile market, warned experts.
Abhinaba writes deep-dive analytical stories on financial markets, corporate India and the economy. After finishing his post-graduation in finance from King’s College London, he moved into journalism three years ago with a goal to “simplify finance for all”. From tracking macroeconomic shifts and dissecting company fundamentals to decoding market sentiment, he connects the dots through data-driven storytelling, helping readers see the bigger picture.Abhinaba writes across sectors and asset classes, analysing IPOs, decoding moves in precious metals and crude oil, and unpacking trends across public and private markets. Collaborating across beats, he aims to be Mint’s “jack of all trades”. More recently, he has also experimented with new storytelling formats, including crisp video explainers for Mint’s YouTube channel.Across formats and topics, his goal remains the same: telling nuanced, insight-rich stories for his readers. When not writing, Abhinaba unwinds by cycling through the streets of Bandra in Mumbai, in search of fresh air and clearer thoughts. On quieter days, he turns to yoga, his preferred antidote to volatile markets, proving that while markets rarely find balance, at least the body occasionally can.