Market downturn hampers investors’ sentiment

The equity market’s sharp correction, fuelled by the West Asia conflict and India’s relative underperformance against global peers over the past two years, has split industry opinions, leaving most investors bewildered. While the Association of Mutual Funds in India (AMFI) pushes its "Mutual Funds Sahi Hai" campaign aggressively, a few fund managers and equity market experts are voicing contrarian views.

DSP Mutual Fund's recent ad in major newspapers, headlined "We Don't Know What Happens Next," has sparked heated social media debates among investors and experts over its messaging and timing. The advertisement highlights market uncertainty while encouraging discipline through systematic investment plans (SIPs) rather than knee-jerk reactions.

Few fund managers, however, feel that India’s equity market was bound for a correction, and the West Asia conflict and its impact on oil prices proved to be the trigger.

A senior fund said that most mutual funds kept on pouring money on super expensive mid cap and small-cap stocks without re-evaluating their strategy. “Investors who started SIPs just one or two years ago might be facing losses, prompting second thoughts about their decision. A lot of them are thinking that a reliable 6% yield by fixed deposits would have been a better choice,” stated the manager requesting not to be named.

In the recently concluded month of March, the Nifty 50 experienced a sharp decline and fell approximately 11.3% to 11.4%, marking one of the worst months in recent years. Before March 2026, India’s equity market had underperformed global peers due to expensive valuation concerns, relentless FII selling, AI-related concerns and global cues such as US tariffs and geopolitical concerns in West Asia.

Global brokerages downgrade India

Global brokerage firm Nomura recently downgraded Indian equities to “neutral” from “overweight”, citing rising risks from elevated oil prices amid ongoing geopolitical tensions in West Asia, a potential slowdown in domestic inflows, and concerns around India’s weak positioning in the artificial intelligence (AI) landscape.

It added that prolonged disruptions to energy supplies through the Strait of Hormuz could keep oil prices elevated for longer than previously expected, posing a significant headwind to India’s economy and corporate earnings. India remains among the most vulnerable economies in Asia to sustained high energy prices due to its heavy reliance on imports.

Brent crude prices are hovering around $110 per barrel per barrel, up around 60% since the US/Israel and Iran conflict began on February 28. Higher oil prices for an import-dependent nation such as India are likely to translate into higher inflation in the coming months, exerting pressure on currency stability and corporate margins, thereby impacting overall equity market sentiment.

Nomura has recommended that investors switch to South Korea and China, where it maintains an “overweight” stance. Other brokerage firms such as Citi Research, Goldman Sachs and Bernstein have all lowered their Nifty 50 targets, warning that a prolonged spell of high oil prices could trigger earnings downgrades and keep market sentiment under pressure.

Goldman Sachs has downgraded Indian equities to ‘marketweight’ from ‘overweight’ and cut its 12-month Nifty target to around 25,300–25,900 from earlier projections of about 29,300–29,500, implying a reduction of roughly 14%. Goldman expects corporate earnings estimates to be revised downward over the next two to three quarters, particularly in sectors linked to domestic consumption and investment.

Meanwhile, Kotak Institutional Equities said that India's equity markets could see a limited earnings impact if the ongoing West Asia conflict ends within the next few weeks, while the recent correction in stock prices has improved the reward-risk balance for investors. The report stated that geopolitical developments, particularly signals from the United States regarding the Iran-Israel conflict, have raised hopes of easing tensions and stabilising energy supplies.

Volatility to continue

The local market fell for the sixth consecutive week, declining by nearly half a per cent, primarily due to heightened global uncertainties. The Nifty and Sensex, settled lower at 22,713.10 and 73,319.55, respectively.

The market is likely to exhibit volatility this week as well as the ongoing conflict in West Asia remains in full fledge. Experts believe any escalation might further weigh on global oil prices and hamper sentiments in the equity market while a de-escalation in attacks will be cheered. Investors would also track the upcoming Reserve Bank of India MPC meeting outcome for future guidance.

"Rising US Treasury yields, a stronger dollar, and Brent crude reclaiming $107 per barrel revived imported inflation fears, while a four-year low in India's Manufacturing PMI added a domestic sting to an already pressured market environment,” said Vinod Nair, Head of Research, Geojit Investments Limited.

He added, “The week ahead is loaded with high-impact triggers across global and domestic fronts. Domestically, the RBI MPC meeting commands centre stage — while a rate pause is near-certain consensus, the central bank walks a tightrope between crude-driven inflation risks and a four-year low Manufacturing PMI signalling a softening growth impulse. The Governor's commentary on the rate cycle trajectory and FY27 projections will be closely monitored.”