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Markets Score 85 Bearish

Indian Equities Face Continued Pressure Amid Iran War and Earnings Concerns

Apr 02, 2026 00:10 UTC
^BSESN, INR=X, ^VIX
Immediate term

Indian markets have seen a sharp decline due to the Iran war, with foreign investors withdrawing and valuations hitting rare lows. Experts caution that the downturn may persist as earnings growth remains weak.

  • The Nifty 50 fell over 10% in March, with foreign investors selling $12 billion in equities, the worst monthly sell-off on record.
  • A February trade pact with the U.S. initially brought $2.5 billion in inflows, but the market has since reversed.
  • India's P/E ratio is at 19.6 times, a level last seen during the early 2020 pandemic and 2022 Russia-Ukraine war.
  • The Indian government has limited currency-hedging positions and cut fuel excise duties to manage the crisis.
  • Analysts warn that weak earnings growth, exacerbated by the Iran war, could persist and affect investor confidence.
  • The Chief Economic Advisor has highlighted significant downside risks to India's growth forecast due to rising energy costs and supply-chain issues.

The Nifty 50 benchmark index in India fell more than 10% in March as foreign investors sold over $12 billion in equities, marking the worst monthly sell-off on record. This follows a period of optimism in February when a trade pact with the U.S. led to nearly $2.5 billion in inflows. The current geopolitical tensions have exposed structural vulnerabilities in India's economy, particularly in relation to rising oil prices and their impact on inflation, fiscal deficits, and the rupee. Analysts warn that without a swift resolution to the conflict, these pressures could persist, further affecting corporate earnings and investor sentiment. The Indian government has taken steps to mitigate the fallout, including limiting currency-hedging positions and cutting excise duties on fuel to curb price hikes. However, these measures may come with trade-offs, such as increased fiscal pressures and reduced spending on capital expenditures. The market's price-to-earnings ratio now stands at 19.6 times, a level last seen during the early stages of the Covid-19 pandemic and the Russia-Ukraine war. Fund managers and economic advisors caution that weak earnings growth, which has been a trend for over a year, could be exacerbated by ongoing supply-chain disruptions and higher energy costs. While some of these challenges may be temporary if the conflict in the Middle East is resolved quickly, the lack of robust earnings growth remains a long-term concern for investors.

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