Market barometer Nifty 50 has suffered a massive loss of almost 9% in the first half of the calendar year 2026 (H1CY26) due to the Middle East conflict, which drove crude oil prices to multi-year highs, weak earnings, a weak rupee, and heavy foreign capital outflow.
Year-to-date, 25 index components are in the red, while as many are in the green.
Stocks such as Infosys, TCS, Wipro, and HCL Technologies have lost 34-38%, while ITC, HDFC Life Insurance, Jio Financial, HDFC Bank, Reliance Industries, Mahindra and Mahindra, and Maruti Suzuki have shed 15-29% year-to-date.
On the other hand, stocks such as Adani Enterprises, Apollo Hospitals, Adani Ports, and Trent have jumped 15-35% this year so far. Shares of Coal India, Grasim, Nestle India, Titan, Sun Pharma, Hindalco, Power Grid, NTPC, and Max Healthcare have jumped 8-10% in H1CY26.
What moved the market in H1?
The domestic market reeled under selling pressure amid heightened geopolitical uncertainty, elevated crude oil prices, and persistent FPI outflows.
The US-Iran conflict, which resulted in the closure of the Strait of Hormuz, drove crude oil prices to the levels seen in 2022 when Russia invaded Ukraine. This posed a major challenge to the Indian economy as the country is the world’s third-largest importer and consumer of crude oil. It meets roughly 85%-90% of its total oil demands through imports.
Elevated oil prices drive the Indian rupee below the 96 per dollar mark for the first time, triggering a sense of panic among investors.
FPIs started selling Indian stocks more aggressively after turning buyers in February.
As per NSDL, FPIs have sold Indian equities worth ₹2,74,272 crore till 30 June this year. Overall, including equities, debt, hybrid, mutual funds, and alternative investment funds (AIFs), FPIs have taken away ₹2,12,872 crore from the Indian financial market this year so far.
Oil prices have corrected by over 20% from their March peak now. Brent crude traded slightly above $73 per barrel on Tuesday.
The intensity of FPI selling has also receded. In fact, they turned into sporadic buyers of Indian stocks in the cash segment in the second half of June.
Arjun Guha Thakurta, Executive Director at Anand Rathi Wealth, underscored that the Nifty’s fall in the first half of the year was driven more by uncertainty than by any major weakness in the Indian economy.
“If we look at previous geopolitical conflicts, such as the Iraq War, the Russia-Ukraine conflict, the Israel-Hamas war or the recent Israel-Iran tensions, markets naturally corrected when the news flow turned negative. On average, these events led to a fall of around 5 to 6% in Nifty 50, but the market recovered in just over one month,” Thakurta said.
“Even if we look beyond wars and geopolitical events, we see that corrections are a normal part of market cycles. Nifty 50 has seen an average drawdown of around 18% every year. Despite that, it has recovered those losses in a little over a year. If we look at the post this fall, it has delivered average returns of around 32% over the next year and nearly 20% annually over the next three years,” Thakurta added.
Is the stock market ripe for a rebound?
Experts are turning positive about the domestic market, even as they do not expect a runaway rally, as there are clouds of doubt on earnings recovery. Some experts believe earnings may start improving only from Q3FY27 onwards.
“Yes, the Indian stock market is primed for a solid rebound in H2CY26, driven by external risks receding and strong domestic growth,” Seshadri Sen, Head of Research and Strategist at Emkay Global Financial Services, told Mint.
Sen highlighted that the recent market weakness was triggered almost entirely by the energy shock arising out of the Middle East conflict. That is now behind us, and the domestic economy is rebounding sharply.
Moreover, the recent correction has softened valuations, bringing the Nifty’s one-year forward price-to-earnings ratio below its long-term average.
However, the primary near-term risk to this outlook is the weak monsoon, which could impact rural incomes and inflation.
“We think there are enough policy levers to counteract this challenge and see this as a transient risk. Any correction would be a buying opportunity,” said Sen.
As per Thakurta, the earnings outlook remains healthy, with Nifty 50 companies expected to grow earnings by 12% in FY27 and 14% in FY28. Moreover, the index is trading around 7% below its estimated fair value, which shows that the market is currently fairly valued.
“We can say that the outlook is positive for investors and a rebound is likely, though investors should avoid relying on any short-term time frame to predict the recovery,” said Thakurta.
“They should not wait for the perfect time to invest, as this often leads to missing a huge part of the recovery. Investors should continue their investments with a long-term view and not react to any short-term market movements,” Thakurta said.
Shrikant Chouhan, the head of equity research at Kotak Securities, highlighted that with Brent crude stabilising near $72 to 74 per barrel, India’s macro stability indicators—inflation and the fiscal deficit are improving.
Chouhan believes a rapid normalisation in global oil and gas supply and shipping may ease India’s macroeconomic pressures in H1FY27, especially if crude oil prices were to fall below $65 per barrel.
“The Indian stock market may see a moderate re-rating on expectations of better macro and broader earnings resilience. Q4FY26 results were above expectations, and Q1FY27 may not be as bad as markets expect. Most of the recent multiple compression for the market has been driven by the banks (unjustified) and IT services companies (largely justified),” Chouhan told Mint.
“We can see a rebound in markets in H2CY26. We estimate the EPS of the Nifty 50 index at ₹1,248 for FY27 and ₹1,430 for FY28, with the Nifty trading at 18.9 times FY27E and 16.5 times FY28. However, forecasts of a poor monsoon may continue to weigh negatively on India’s growth-inflation dynamics,” said Chouhan.
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Disclaimer: This story is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.