India’s stock market is on track for its fiscal performance in six years as the Iran war delivers crude shock to the economy, amid record flight of foreign capital from Dalal Street.
The equity benchmarks—NSE Nifty 50 and the S&P BSE Sensex—have fallen about 4.3% and 6.3%, respectively, in FY26 for the worst showing since the pandemic-marred FY21. On Monday, they slid another 2% each.
They have underperformed other Asian and EM peers in FY26 and are trading at a nearly one-year low levels. The rupee has slid to record lows against the US dollar and bonds fell on elevated crude oil prices.
India’s financial year runs April through March. The stock holiday will be shut on 31 March 2026, for Mahavir Jayanti, making Monday the final session of FY26.
War Trumps Fiscal Policy
While income-tax relief up to ₹12 lakh, GST rate cut to 5% and 18% only and 100 bps reduction in repo rate lifted the economy for most part of FY26, every supportive fiscal and monetary policy was laid to waste by the US-Israel war on Iran that broke out in the final month of the fiscal.
The Iran war has pushed crude oil prices to as much as $120/barrel, disrupting the fiscal math of the world’s third largest crude importer.
“A prolonged Iran war is going to be a catastrophic event, because of India’s dependence on crude…that’s a real concern going into the new fiscal year,” said Vivek Shukla, regional head at Emkay Global Financial Services in Bengaluru.
Battered Stocks
IT stocks, the second-heaviest sector, tumbled about 21% in FY26, pressured by concerns that AI-led disruption could cap earnings growth, alongside softer US client spending and record foreign selling. Tata Consultancy Services Ltd., Wipro Ltd. and Infosys Ltd. rank among the Nifty 50’s worst fiscal year performers.
“Gen AI differs from past tech transitions on two counts: one, it hits at (the) core of Indian IT and two, expands competition beyond IT services to Software/Gen AI natives,” Ashwin Mehta of Ambit Institutional Equities said. “A 15%-20% revenue deflation is quite possible over three-five years.”
Flight of Foreign Capital
Foreign investors offloaded a record $19.3 billion worth of Indian equities in the fiscal, with IT seeing the highest outflows among sectors.
Elevated US bond yields, sustained pressure from high crude prices and more attractive valuations elsewhere could delay a revival in foreign interest, Emkay’s Shukla said.
