Why India's Markets Didn't Crumble: Analyzing March 2026 Resilience Amid Global War Jitters

Why India's Markets Didn't Crumble: Analyzing March 2026 Resilience Amid Global War Jitters​

Market Resilience Tested by Foreign Selling Intensity​

March 2026 saw Indian markets face intense pressure from foreign investors (FIIs). The month recorded the second-highest intensity of FII selling over the past decade, surpassing only the panic-driven liquidation observed during the COVID crash in March 2020. This period was marked by global jitters concerning geopolitical conflicts and rising crude oil prices.

Foreign institutions aggressively sold Indian equities throughout the month. In absolute terms, the FII selling amounted to ₹1.23 lakh crore. This figure is double that of March 2020, when FIIs sold a net amount of ₹62,500 crore. On a significantly larger asset base of ₹62.46 lakh crore, the 2026 outflow equated to selling nearly 2% of their total equity stake in Indian markets.

Comparison with March 2020 Volatility​

The market environment in March 2026 was challenging due to various factors, including fears of a wider US-Iran conflict and capital shifting towards AI opportunities in Taiwan and South Korea. However, the reaction differed markedly from the COVID crisis of March 2020.

In March 2020, FII selling reached its peak intensity during that month. Equities were sold by FIIs (net) for ₹62,500 crore, representing nearly three per cent of their total assets under custody at the time. The Nifty plunged more than 30 percent from its January peak to its March low in 2020.

How Domestic Institutional Buying Stabilized Equities​

Despite the severe pressure exerted by aggressive foreign selling, Indian equities demonstrated significant resilience. The Nifty fell 11 percent in March 2026. It dropped 15 percent from its peak on January 2, 2026, to its low on March 30, 2026.

This stability was attributed to steady domestic institutional buying countering the foreign outflows. This resilience reinforces a fundamental change within the Indian market structure compared to previous cycles. Sustained domestic inflows through mutual funds, SIPs, insurance, and retirement savings have emerged as a powerful counterweight to external capital shocks.

Reassessing Market Fundamentals and Outlook​

Markets are currently grappling with familiar anxieties, including rising geopolitical tensions, pressure on the rupee, and fears of renewed foreign outflows. Nevertheless, the events of March suggest that extreme FII selling alone is no longer sufficient to trigger a deep and prolonged correction in Indian markets.

The market remains supported by strong SIP flows, which provide domestic institutions with ample opportunity to continue purchasing shares. Furthermore, supportive earnings growth is widely expected to lend justification to current valuations, which are generally considered reasonable.

While the risk of higher crude prices is acknowledged, geopolitical risk retains potential for unknown supply disruptions and sentiment impacts. For now, the underlying strength provided by consistent domestic participation provides a solid floor under the market structure.