Stock market crash: A confluence of strong headwinds, in terms of the Middle East conflict, higher crude oil prices, a weaker rupee, massive foreign capital outflows, and waning expectations of monetary easing are keeping the Indian stock market under pressure.
On Tuesday, 12 May, the Sensex and the Nifty 50 declined about 1% in intraday trade, falling for the fourth consecutive session. In these four days, they have shed 3% each, while investors have lost about ₹11 lakh crore as the cumulative market capitalisation of BSE-listed firms dropped to ₹462 lakh crore during Tuesday’s session from ₹473 lakh crore on Wednesday, 6 May.
No one can predict which way the market will go from here. Can the market rebound from here? Is there more pain in the offing? The bigger question is- is it time to hold cash and stay on the sidelines?
Indian stock market outlook
The stock market is in a wobbly territory. The Nifty 50 has breached 23,600 on the downside, and it is heading to the next major support at 23,500. If it breached even below this, the next support is near 23,100.
The current setup is not giving clear signals. Market volatility is high, and the outlook is hazy because the potential talks between the US and Iran have failed, and there are signs of fresh escalations in tensions between them.
As media reports suggested, US President rejected Iran’s proposals, terming them “totally unacceptable” and warning that the ceasefire with Iran was on a ‘massive life support’, hinting at its end. Tehran also issued a statement saying that it was ready for any aggression.
“Nifty has now fallen below 23,600. The possibility of it slipping below 23,500 cannot be ruled out. If 23,500 breaks decisively, the index could potentially fall towards 23,100,” said Rohit Srivastava, the founder and market strategist at Indiacharts.com.
Ajit Mishra, SVP of Research at Religare Broking, also said that given the weak global cues and the impact of Prime Minister Narendra Modi’s austerity call on market sentiment, the index could fall further to 23,500 or even lower.
“The market has been consolidating within a broad range of 23,800 to 24,500 for nearly three weeks now. The next key support level comes around 23,500. If that level is breached, the market could even test the gap area visible on the weekly charts near 23,150,” Mishra said.
Is it time to hold cash and stay on the sidelines?
Warren Buffett’s Berkshire Hathaway is reportedly sitting on cash at this juncture, signalling the possibility of a prolonged downtrend in the market. As media reports suggest, held a cash pile of more than $397 billion in the first quarter of 2026.
The company increased its cash holdings in the first quarter. When Buffett left Berkshire Hathaway as the CEO in December last year, Berkshire’s cash pile was $370 billion.
Does it indicate it is time to stay on the sidelines and protect cash?
The answer to this question lies in how one sees the market.
The market has to be seen in different contexts. On the index front, there could be more downside in store. However, in the broader market, there are many quality stocks available at attractive valuations. Besides, it also depends on the time horizon of your investment.
“It depends on the time horizon you are looking at. Even if the market falls to 22,000, it could still be considered a ‘buy the dip’ opportunity from a longer-term perspective. The real challenge is not whether to buy the dip, but determining how deep the correction could be,” said Srivastava.
“If we assume that the April lows marked the market bottom, then the current decline can be viewed as a retracement. Such retracements can vary widely — they could be 38%, 50%, 61%, 78%, or even 90% of the previous rally. That is why investors spend so much time trying to judge whether the market will fall more or stabilise,” Srivastava said.
At this stage, the market is witnessing a pullback, which broadly fits within a buy-on-dips framework. However, the exact size of the correction remains uncertain.
A lot will depend on global and domestic developments, particularly whether geopolitical tensions escalate further or the US gets drawn deeper into conflict.
“I would not advise investors to move entirely into cash. The outlook depends largely on how the Iran-US conflict evolves because oil prices are the key variable driving the market right now,” said G Chokkalingam, founder and head of research at Equinomics Research.
“If the conflict ends or tensions ease, crude oil prices could crash sharply. So, this is essentially a call on geopolitics and oil prices. Despite delays in negotiations, I remain optimistic that a resolution will eventually be found because neither the US nor Iran can afford a prolonged conflict,” said Chokkalingam.
Mishra of Religare Broking does not recommend completely staying away from the market. Instead, he suggests investors and traders should adopt a balanced strategy.
“On the index front, one can look for shorting opportunities. Investors can also hedge their long positions by buying protective puts. At the sectoral level, there are still selective opportunities on the long side. Pharma and healthcare stocks continue to show strength. There are also opportunities in select FMCG counters and certain energy stocks that are holding firm despite market weakness,” said Mishra.
“At the same time, there are shorting opportunities in crude oil-sensitive sectors such as banking and IT. So, rather than exiting the market entirely, investors should maintain positions on both sides — selectively buying strong sectors and hedging or shorting vulnerable segments,” Mishra added.
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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.