FY26 Market Review: Inside Nifty-Sensex's Sharpest Yearly Crash Since COVID; What's Next For Investors?

FY26 Market Review: The financial year 2025-26 unfolded as a perfect storm for global markets, which started with United States President Donald Trump's 'Liberation Day' tariff jolt and closed under the shadow of the Iran-US war. As multiple events rattled the Indian stock market in the period, Indian benchmark indices mirrored the turmoil. Nifty fell close to 4% and BSE Sensex tumbled around 4-5% in FY26, marking it as the steepest yearly decline since COVID pandemic.

"FY2026 underscored the challenges of an uncertain and volatile global macro environment, with equity markets underperforming owing to President Trump's tariffs from the first quarter onwards, and a sharp crude oil price spike due to supply disruptions in the fourth quarter, driving cost inflation and weighing on corporate margins," explained Vikrant Chaturvedi, Associate Director-Research, Brickwork Ratings.

The Indian stock market retained its footing in the first half of FY26, but saw steep correction in the second half of the year, especially after Iran-US war. Nifty 50 has fallen close to 13-15% in March since the beginning of the war in West Asia.

"From January 2026 the market started fumbling and after the start of the US-Israel-Iran war the markets have continued performing badly with oil prices exploding, FIIs continuously pulling out money, and accelerating the INR depreciation against the USD. The market has corrected nearly 11%-12% from the beginning of the war," explained Vikas Gupta, CEO & Chief Investment Strategist at OmniScience Capital.

As FY 26 draws to close, let's decode Nifty and Sensex performance in the period and what can investors expect in the next financial year.

Nifty 50 FY26 Review | Biggest Yearly Fall In Decade After COVID

A month before the end of FY26, the Nifty 50 spiralled into a roaring bear market, with the 50-stock benchmark experiencing its most severe single-day and weekly crashes in years. The stock market crash was driven by a host of factors, including the depreciating value of the Indian Rupee, crude oil price rally, geopolitical uncertainty due to Iran-US war, etc.

Goodreturns analysis of Nifty50's performance in last ten financial years indicate that it suffered its second-worst fall in FY26, the worst being in FY 2020 where it declined around 26%.

Out of all the Nifty 50 indices, Nifty Realty, Nifty IT, and Nifty FMCG were among the biggest laggards as they declined close to 21%, 20%, and 13% respectively in FY26. Nifty Metal, Nifty PSU Bank and Nifty Auto were among the top gainers by registering close to 32%, 23% and 14% gains respectively.

What's Next For Investors?

The market is likely to remain volatile due to geopolitical shockwaves and spillover effect of the Iran-US war. However the 10-year analysis of Nifty 50 performance hints at a silver-lining. Every yearly dip in Nifty 50 is followed by a strong recovery in the Indian stock market.

"For an actively curated portfolio of stocks available below their intrinsic value, the probability of significant alpha over the next 3-5 years is very high at the end of FY26 and augurs a good beginning for FY27," stated Vikas Gupta, CEO & Chief Investment Strategist at OmniScience Capital.

"We expect commodities to outperform in FY2027, with base metals driven by infrastructure demand, precious metals acting as safe havens, and oil & gas supported by geopolitical risk premiums. Equities face continued headwinds, while debt markets should offer relative stability. FY2027 will be a year of selective but constructive performance across asset classes," added Vikrant Chaturvedi, Associate Director - Research, Brickwork Ratings.