Indian stock markets fell in May 2026 amid rising crude oil prices, FII selling, US-Iran tensions and weak rupee concerns. Analysts explain what triggered the decline and what investors should do now
FPIs have reduced shareholding in large-cap stocks like HDFC Bank, Reliance and Infosys since 2022 while increasing exposure to Paytm, Eternal, Polycab and healthcare stocks, ICICI Securities said
While the bulk of foreign selling is likely over after the outflows over the recent months, Goldman Sachs does not see foreign investors returning to Indian shores in a hurry, even if oil prices dip.
Data has shown that on falling market days, retail investors were net buyers, and on rising days, they were net sellers. So, the idea that they are always disadvantaged is a misnomer, Kumar said.
Indian stock markets crashed on April 2, 2026, with the Sensex falling over 1,500 points and Nifty dropping 2 per cent after US President Donald Trump's warning of intensified attacks on Iran
Going ahead, analysts believe the probability of another year of relative underperformance remains high, unless earnings improve meaningfully, crude stabilises, and foreign flows return
Foreign outflows, the West Asia conflict, rupee depreciation, uncertainty around US tariffs, and elevated valuations were among the key factors that influenced investor sentiment
Analysts expect FIIs to stay cautious on Indian equities in H1FY27 as global risks weigh. They, however, see flows returning in H2FY27. Strong DII inflows could also support Indian markets.
For FII's, the favored markets over last two years have been countries that were beneficiaries of new age tech and artificial intelligence (AI), he said.
Utsav Verma of Choice Institutional Equities said that long-term investors should deploy funds in a staggered manner in sectors with stronger earnings visibility
In January 2026, mutual funds increased their exposure to domestic sectors such as services, cement, real estate, consumer services, financial services, and power & utilities
The reduction in US tariffs and the interim trade deal framework are set to significantly boost India's export competitiveness, said Subhash C. Aggarwal
The India-US trade deal, Antique believes, is significantly positive for Indian equities as FPI equity outflow of $34 billion since October 2024, the highest among emerging markets (EMs), may reverse
