A sharp global energy shock and rising stagflation risks triggered a synchronized selloff across global asset classes in March 2026, though Indian markets demonstrated relative resilience against a backdrop of record foreign outflows. According to PL Asset Management, the asset management arm of PL Capital Group, the month was defined by a systemic correction in equity markets worldwide after crude oil prices spiked 52% following disturbances in the Strait of Hormuz. This surge in energy costs drove global inflation higher, compelling central banks to maintain a higher-for-longer interest rate policy. The resulting de-risking saw major indices tumble, with South Korea's KOSPI falling over 19% and Japan's Nikkei declining more than 13%. As per PL Asset Management, this regime change simultaneously impacted equities, bonds, currencies, and traditional safe-haven assets.
In India, the Nifty 50 recorded an 11.3% decline during March, as reported by PL Asset Management. The firm described this as a systemic correction rather than a sector-specific rotation, as risk aversion permeated the entire market. While leading sectors like PSU banks, realty, and automobiles faced significant pressure, defensive segments such as pharmaceuticals and FMCG failed to provide their usual cushioning effect. The Indian market faced a record net outflow of approximately ₹1.22 lakh crore from Foreign Institutional Investors (FIIs), though this was largely offset by robust Domestic Institutional Investor (DII) inflows totalling ₹1.43 lakh crore. Siddharth Vora, Head of Quant Investment Strategies and Fund Manager at PL Asset Management, noted that March 2026 marked a liquidity-driven, macro-led correction rather than a fundamental reset, with forced deleveraging amid an energy shock and tightening financial conditions.
Despite India's resilience, economist Swaminathan Aiyar warns of significant second-order impacts from the West Asia crisis. India's heavy dependence on the Gulf for LPG and LNG represents its most acute vulnerability, with Qatar — a key supplier — indicating its damaged gas fields could take up to five years to fully repair. Aiyar expects inflation to rise well above the RBI's 4% comfort zone, possibly touching 5-6%, as higher input costs force the government to raise minimum support prices across crops. Industries relying on LPG or LNG as raw materials, from ceramics to chemicals, are already under stress, with aluminium prices surging due to Gulf supply disruptions. The economist warns that second-order impact on certain industries will be very significant and will be seen in the next two quarters, maybe even beyond, regardless of when the conflict resolves.
To absorb the macro shock, Aiyar believes the government has both the political will and capacity to expand the fiscal deficit by 1-1.5% of GDP. With the NDA politically secure, difficult decisions — including long-delayed fuel price hikes — will come after the elections. He would not be surprised if the fiscal deficit touched 5.5% for one year. On monetary policy, Aiyar is clear: the RBI should not be cutting interest rates in this environment — if anything, the direction of risk is the other way. A swift resolution is expected due to US political pressures, with petrol prices in the US up around 33% and diesel by about 25%, directly hitting consumers and feeding into transport and manufacturing costs.
