Global brokerages including JP Morgan, HSBC, Nomura, and Goldman Sachs have downgraded Indian stock markets, with the Nifty 50 declining 11.31% in March as the US-Iran war escalated. According to reports from Mint, foreign portfolio investors (FPIs) have recorded ₹191,969 crore in year-to-date outflows, with ₹60,847 crore additional outflows in April following massive selloffs of ₹117,775 crore in March and ₹35,962 crore in January. The MSCI Emerging Markets index surged 31% in FY26, significantly outperforming India's near-flat to negative performance in dollar terms over the past two fiscal years.
The US-Iran war has effectively blocked the Strait of Hormuz, a critical chokepoint accounting for 20% of the world's energy needs, driving Brent crude prices nearly doubled to around $120 per barrel since the beginning of the year. As reported by Mint, India depends on imports for 85% of its energy needs, making this oil shock particularly significant for the country. Global brokerages have responded by lowering Nifty targets, cutting earnings expectations, and downgrading market stance, signalling risk aversion as valuations don't justify current risks.
Despite the challenging performance, retail conviction remained strong with healthy equity fund and SIP inflows during the market decline. According to Mint, over two years, the Nifty 50 has seen a mere 2.6% increase, while domestic institutional framework includes 21 crore demat accounts and upwards of ₹30,000 crore in monthly SIPs. The DII ownership has surpassed FPI ownership, suggesting a stronger long-term case for India equities compared to five years ago, though experts note that oil shocks, geopolitical events, and electoral cycles create India-specific risks that global diversification can help smooth out.
Financial experts recommend global allocation of 5-15% depending on risk appetite as a satellite portfolio to reduce downside risks. As reported by Mint, Santosh Meena from Swastika Investmart suggests 10-15% global allocation with specific funds like Motilal Oswal Nasdaq 100 FoF or Navi Nasdaq 100 FoF for US tech exposure. Tanvi Kanchan from Anand Rathi recommends S&P 500 Index Fund for broad US market exposure and Emerging Market Fund for diversified global exposure. The strategy aims to participate in pure-play tech leaders unavailable on NSE while benefiting from rupee depreciation acting as a natural performance booster for USD-denominated assets.
