Sensex, Nifty tumble over 10% in March, worst since Covid crash; ₹41 lakh crore wiped out

India’s equity markets have witnessed a steep correction in March, as escalating tensions in West Asia triggered a global risk-off sentiment. Since the outbreak of the U.S.-Israel-Iran conflict on February 27, benchmark indices have lost over a tenth of their value, marking their worst monthly performance since the pandemic-driven crash of March 2020.

The BSE Sensex has plunged 8,665 points, or 10.5%, from 82,248.61 on February 26 to 73,583.22 on March 27. The Nifty 50 mirrored the fall, losing 2,677 points, or 10.5%, to settle at 22,819.60. The sell-off has been broad-based, with the Nifty Midcap 100 and Nifty Smallcap 100 declining 9.5% and 8.7%, respectively.

This marks the worst monthly performance since March 2020, when benchmark indices had plummeted over 23% in a single month due to global lockdowns.

On a year-to-date basis, the benchmarks are down nearly 13%, including a sharp 10% correction in March alone. In value terms, the sell-off has wiped out around ₹55 lakh crore in investor wealth so far in 2026, with ₹41 lakh crore eroded in March alone.

Five factors behind the market sell-off:

1. Geopolitical escalation and supply shock fears

The trigger was a sharp escalation in the West Asia conflict under “Operation Epic Fury” involving the United States, Israel, and Iran. The Strait of Hormuz - through which nearly 20% of global oil and gas flows - has emerged as the epicentre of risk. Disruptions to shipping routes, damage to energy infrastructure, and rising freight and insurance costs led to a swift repricing of global risk.

“Indian equities moved through a turbulent phase as geopolitical tensions in West Asia and uncertainty around the Strait of Hormuz dominated global sentiment,” says Vinod Nair, Head of Research at Geojit Investments, adding that sentiment remains fragile despite intermittent rebounds.

2. Oil spike and inflationary concerns

Brent crude surged to around $120 per barrel, while LNG prices rose 72% year-to-date, diesel 75%, petrol 60%, and coal 22%. For India, this has amplified fears of imported inflation, margin pressure, and a widening current account deficit, while also raising the risk of delayed global rate cuts.

3. Currency depreciation and macro headwinds

The Indian rupee weakened sharply, breaching ₹94 and hitting a record low of ₹94.90 against the US dollar. Rising crude prices, capital outflows, and a strong dollar compounded the pressure, while elevated global bond yields tightened financial conditions for equities.

4. Persistent FPI selling amid valuation concerns

Foreign portfolio investors have pulled out ₹1.59 lakh crore from Indian equities so far in 2026, including ₹1.11 lakh crore in March alone.

While domestic institutional investors injected ₹2.35 lakh crore, cushioning the fall, the sustained FPI outflows kept markets under pressure.

5. Volatility surge and failure of traditional hedges

India VIX surged 56% over the past month to cross 27, signalling heightened uncertainty. At the same time, traditional safe havens failed - bonds struggled due to inflation concerns, while gold and silver corrected 16–19% in March, intensifying the risk-off sentiment.

Market experts warn that volatility is likely to persist. Ajit Mishra of Religare Broking notes that elevated crude prices, sustained FII outflows, and currency weakness continue to weigh on sentiment, while derivative expiry cycles are adding to near-term instability.

Technical indicators, too, reflect indecision. According to Vinay Rajani of HDFC Securities, the Nifty has formed a long-legged Doji on weekly charts, indicating a potential reversal, but confirmation hinges on a sustained move above key resistance levels. “The recent swing high of 23,465 now acts as resistance, while 22,471 remains near-term support,” he says.