Markets Recover, But Tensions Refuse to Fade

Markets rallied on ceasefire optimism and easing crude, but failed talks and renewed threats have kept sentiment fragile, suggesting that volatility could resurface anytime.[EasyDNNnews:PaidContentStart]

After weeks of persistent weakness, the past fortnight offered a much-needed breather for investors. Indian benchmark indices staged a steady recovery across most trading sessions, initially displaying resilience despite Trump’s threat that “a whole civilisation will die,” and later gaining stronger momentum as tensions eased with Iran and the U.S. moving towards a ceasefire and diplomatic negotiations. After surging past USD 110 per barrel, oil prices retreated sharply to hover in the USD 90-95 range, easing a key overhang for global markets.

The cooling of crude prices, coupled with receding geopolitical tensions, triggered a broad-based rally across international equities. The improving sentiment was mirrored domestically as well, with the Nifty VIX, a key gauge of market fear, plunging nearly 30 per cent during the period, signalling a marked reduction in volatility and investor anxiety. Against this backdrop, benchmark indices BSE Sensex and Nifty 50 delivered strong gains of around 5-6 per cent each over the fortnight. The optimism was even more pronounced in the broader markets, where Mid-Cap and Small-Cap indices surged by 7-8 per cent, reflecting improving risk appetite among investors.

Encouragingly, Mutual Fund flows reinforced this positive trend. Despite the earlier phase of market weakness, equity mutual funds across categories witnessed a notable surge in inflows in March 2026. This trend underscores a maturing investor mindset, where market corrections are increasingly being perceived as strategic entry opportunities rather than triggers for exit. Sectoral performance remained buoyant, with all major indices trading in the green and posting strong recoveries. Beaten-down sectors such as Real Estate, metals and auto witnessed robust buying interest and sharp rebounds.

In contrast, relatively defensive pockets like healthcare and FMCG delivered modest gains, reflecting a gradual shift in investor preference towards cyclical and high-beta segments amid improving market sentiment. Tracking institutional flows, foreign institutional investors (FIIs) remained persistent sellers during the period, pulling out nearly ₹50,000 crore from domestic equities. In contrast, domestic institutional investors (DIIs) stepped in with comparable inflows, effectively cushioning the market and lending much-needed stability amid sustained foreign outflows.

In other developments, at its April 2026 monetary policy meeting, the Reserve Bank of India kept the repo rate unchanged at 5.25 per cent, maintaining a neutral stance amid global uncertainties. Market conditions remained largely stable through the weekend, before sentiment took a hit on fresh geopolitical developments. The Iran-U.S. talks in Islamabad ended without any resolution, followed by renewed tensions as Trump threatened a U.S. blockade in the Strait of Hormuz. While there are indications that both sides may consider a second round of negotiations, the situation remains uncertain. These evolving developments are likely to play a crucial role in shaping the market’s future trajectory. Stay tuned!

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