A dream of ₹1 lakh, a reality of zero! The Sensex delivered zero returns in two years. Where do investors stand 24 months later?
The Sensex has dashed all expectations of the past two years. From the hype of 100,000, it has fallen to its lowest level in two years, delivering zero returns to investors. Weak earnings, heavy FII outflows, global tensions, and a delay in interest rate cuts by the Fed dragged the markets down during FY26, leaving investors cautious. FY27 now appears to be a year of limited opportunities.
India's equity markets haven't given investors much to cheer about over the past two years. The benchmark Sensex is now hovering near a two-year low, and returns have been nearly flat during this period.
This weakness was particularly evident in FY26, when a combination of global shocks and domestic pressures led both major indices to end the year in negative territory.
Nifty closed more than 5% lower at the end of FY26, while the Sensex fell 7% to close at 72,000. In the past two years, the Sensex had twice reached a high of around 85,000.
This decline can be better understood if we recall the talk that the index would touch 100,000. However, the exact opposite has happened during this period. Let's try to understand this in more detail...
What caused the stock market to fall?
Tariff-related uncertainties, continued foreign capital outflows, weak corporate earnings growth, high valuations, and a weakening rupee kept markets under constant pressure for most of calendar year 2025. These factors combined to prevent any significant gains, even during intermittent upswings.
The situation worsened towards the end of the fiscal year, when geopolitical tensions escalated in West Asia following the Iran-Israel-US conflict. This escalation led to a sudden spike in crude oil prices,
further complicating India's macroeconomic outlook by raising inflation concerns and pressuring corporate profits. Additionally, expectations of an interest rate cut by the US Federal Reserve diminished significantly, further tightening global liquidity conditions and further pressuring equity markets.
Foreign institutional investors (FIIs) played a significant role in this market decline. During FY26,
FIIs withdrew ₹1.8 lakh crore from Indian equity markets, with the selling spiking sharply in the last quarter. In the three months ending March 2026 alone, capital outflows amounted to ₹1.31 lakh crore.
Which sectors saw a decline?
Strength in some sectors was offset by sharp declines in several key sectors. Concerns about a global recession led to a 21 percent drop in the Nifty IT Index,
while new-age and digital businesses tracked by the Nifty India Internet Index fell 19 percent. Real estate and tourism were the worst affected sectors.
High interest rates and demand concerns led to a massive 23 percent decline in both sectors. Consumption-related sectors also came under pressure, with FMCG falling 15 percent and media falling 14 percent.
Financial sectors, typically market leaders, also failed to provide support. The Nifty Financial Services Index fell 6 percent, and the Nifty Bank Index slipped 2 percent.