Indian equities saw a significant drop on Friday, ending a five-day rally. Heavy selling in IT stocks, influenced by Accenture's revised guidance, and weak global cues, including the cancellation of US-Iran peace talks, led to substantial declines in the Sensex and Nifty.
The Indian rupee depreciated by 2 paise to close at 94.60 against the US dollar on Tuesday, halting a two-session gain. Despite easing crude oil prices and optimism over a US-Iran peace deal, foreign capital outflows from Indian equities capped the rupee's rise.
Indian stock markets, Sensex and Nifty, rose for the third consecutive session on Tuesday, driven by positive global trends, foreign fund inflows, and easing crude oil prices following a reported US-Iran peace deal. The Sensex closed up 0.71% at 76,808.48 and Nifty 50 rose 0.57% to 23,989.15.
Indian equity markets face near-term pressure from the West Asia conflict, with the June quarter expected to be challenging due to elevated fuel prices and a delayed monsoon. Despite potential FY27 estimate downgrades, corporate earnings remain resilient. Financials are seen as an attractive sector with accelerating credit growth, while long-term opportunities lie in capital goods, renewable energy, and energy transition themes.
Sandeep Neema of PL Asset Management advises Indian investors to focus on improving fundamentals rather than weak sentiment, highlighting opportunities in financials, metals, power, and pharma for long-term gains.
Indian equities have outperformed other asset classes long-term, beating inflation by 7-9% on average, according to FundsIndia's Wealth Conversations Report May 2026. Nifty 50 TRI has shown consistent positive returns over 7 years.
Foreign institutional investors (FIIs) are unlikely to return to Indian equities soon due to modest dollar returns, the AI revolution favoring other markets, and tax changes. A comeback may occur if valuations hit rock bottom, IPO activity surges, or global markets overheat.
Foreign investors have withdrawn Rs 27,048 crore from Indian equities this month, continuing a trend that has seen Rs 2.2 lakh crore exit in 2026. Global macroeconomic uncertainty, geopolitical tensions, and a strong US dollar are cited as key drivers.
Jewellery stocks saw a sharp decline on Monday. Prime Minister Narendra Modi appealed to citizens to reduce gold purchases. This call aims to preserve foreign exchange reserves. Major jewellery companies experienced significant drops in their share prices. Investors reacted quickly to the potential demand impact. Indian equities opened lower amid global concerns.
Foreign portfolio investors have withdrawn over Rs 2 lakh crore from Indian equities in 2026, with May seeing further outflows of Rs 14,231 crore. Persistent global macroeconomic uncertainties, including inflation and interest rate concerns, are driving this trend, making developed market debt more attractive. Despite overall selling, some selective interest remains in specific sectors and growth-oriented mid and small-cap stocks.
Foreign investors are significantly reducing their stake in Indian equities, with FII ownership hitting a multi-year low. Concurrently, domestic institutional investors, particularly mutual funds fueled by SIPs, are increasing their holdings, absorbing much of the foreign selling and reshaping market ownership.
Foreign investors continued their selling spree in Indian equities, withdrawing Rs 60,847 crore in April following a massive Rs 1,17,775 crore sell-off in March. Cumulative FPI outflows from Indian equities have reached Rs 1,91,969 crore in 2026, reflecting a shift in global capital towards Asian economies benefiting from the AI investment boom, particularly South Korea and Taiwan.
Market volatility driven by geopolitical conflict often triggers investor panic. Financial experts argue that Systematic Investment Plans (SIPs) are specifically designed to leverage these downturns through consistent accumulation, advising investors to maintain discipline over market timing.
Alok Agarwal of Alchemy Capital Management argues Indian equities present a compelling opportunity for patient investors after MSCI India underperformed emerging market indices by over 50 percentage points. With Brent crude at $125 and FIIs having sold $20bn of Indian equities, Agarwal sees pessimism as the entry point. He favours metals and mining, capital markets, power infrastructure and defence sectors, while preferring PSU banks and smaller private lenders over large private banks.
The Indian rupee fell 32 paise to an all-time low of 95.20 against the US dollar in early trade on Thursday, pressured by surging global oil prices past $120 and a strengthening dollar. The BSE Sensex crashed 821 points while FIIs continued offloading Indian equities, selling shares worth Rs 2,468.42 crore on Wednesday.
JPMorgan has downgraded Indian equities to neutral from overweight, warning the Nifty 50 could fall to 20,500 in a worst-case scenario—a 15% drop from current levels. The brokerage cited high valuations and Iran conflict uncertainty as key concerns, while also flagging risks to company earnings from potential energy supply disruptions. HSBC also downgraded India to underweight, its second downgrade in two months, pointing to rising inflation risks from high oil prices and the ongoing West Asia conflict impacting India's energy-dependent economy.
