March's 10% fall was an oil story before it was a sentiment story

Indian equities lost roughly a tenth of their value in March 2026. That is a large move for a month in which the domestic macro news flow was, on its face, unremarkable: inflation at 3.21%, a central bank on hold at 5.25% and a policy rate nobody was expecting to move. The explanation sits outside the domestic data, and it is not complicated.

• Sensex and Nifty: down about 10% over the month
• Nifty Bank: down about 16%, with private banks down about 15%
• Realty: down about 15%; autos down about 13%; defence down about 11%
• FMCG and oil and gas: down about 10%; metals down about 9%; infrastructure down about 8%
• Energy: down about 4%, the smallest fall among the major sectors
• Midcap down about 5.5% and smallcap down about 8.5%

Three forces, in order of importance

First, the imported cost of everything. Crude traded above $105 a barrel through the month, which for an economy that imports the majority of its oil is a tax on consumption and on the current account at the same time. Second, the currency: the rupee reached record lows against the dollar, which amplified the oil shock into every imported input and into the valuations of companies with dollar costs. Third, the foreign investor: sustained selling by FPI investors removed the marginal buyer precisely in the month the macro backdrop turned negative.

The sector map is the argument. Banks and realty falling furthest is not a verdict on Indian credit or on domestic property demand; it is what happens to the most rate-sensitive, most leveraged parts of the index when the risk-free asset looks attractive in dollars and the currency is sliding. Energy falling least is the mirror image. A month that was bad for importers was, in relative terms, a good one for the companies that sell into the import bill.

The Reserve Bank's February decision is the piece of context worth holding on to. A Monetary Policy Committee holding at 5.25% with a neutral vote, and an inflation print at 3.21% that gave it room, is a central bank that is not the source of this month's stress. The argument that follows is narrower than the headlines suggest: this was a terms-of-trade and foreign-flow month, and the domestic data neither caused nor could have absorbed it.