‘Higher fuel costs, production and debt costs will reduce corporate profits, leading to a decline in valuations.’ This stark warning from Siddharth Vora, Fund Manager at PL Asset Management, encapsulates the growing concerns surrounding the Indian stock market as it prepares for a tumultuous trading session.
As of April 10, 2026, the Indian stock markets are expected to start trading with considerable volatility. This comes in the wake of ongoing withdrawals by Foreign Institutional Investors (FIIs), which have sparked unease among domestic investors. The rupee’s weakness against the US dollar, currently at ₹92.7870, further complicates the economic landscape, as rising crude oil prices, trading at around $96.59 per barrel, threaten to squeeze corporate margins.
On April 2, FIIs sold approximately ₹9,229.52 crore worth of stocks, a move that has left many investors questioning the sustainability of the current market rally. In contrast, Domestic Institutional Investors (DIIs) have stepped in, purchasing stocks worth ₹6,709.74 crore on the same day. This dichotomy highlights the tension between foreign and domestic investment strategies amid a shifting economic environment.
Moreover, the Short Long Ratio for FIIs has surged to 16.8, indicating a significant increase in short positions. This trend suggests that many investors are bracing for further declines, as they hedge against potential losses. However, there is a glimmer of hope; Small Cap indices have shown a resurgence, with 60% of companies trading above their 10-day moving average, indicating some resilience in the market.
Looking ahead, analysts remain cautiously optimistic. Emkay Global Research noted, ‘If a ceasefire occurs between the US and Iran, there could be a significant rally in Indian stocks.’ This statement underscores the potential for geopolitical developments to influence market dynamics, particularly in a climate where investors are increasingly focused on global events.
In terms of earnings, the Nifty’s Earnings Per Share (EPS) is projected to grow by 13-15% in the fiscal years 2025-27, which could provide a buffer against the current volatility. However, the Nifty index is trading at approximately 17.5 times forward earnings, which is below its long-term average, suggesting that valuations may still have room to adjust.
Despite these positive indicators, the market’s short-term direction will likely be determined by geopolitical developments, crude oil price movements, and FII flows. Investors are advised to focus on companies with strong fundamentals and clear earnings potential, as the current uncertain environment poses significant risks.
Details remain unconfirmed regarding the long-term impact of continuous FII selling on domestic buying, as well as the future trajectory of crude oil prices and their effect on inflation and GDP growth. As the situation evolves, market participants will need to stay vigilant and adaptable to navigate the challenges ahead.
