‘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 braces for a period of volatility.
As of April 10, 2026, the Indian stock markets are expected to start trading with some fluctuations, primarily influenced by the continuous withdrawal of funds by Foreign Institutional Investors (FIIs). This trend has raised alarms among investors who are closely monitoring the situation. In a significant move, FIIs sold approximately ₹9,229.52 crore worth of stocks on April 2, highlighting a stark contrast to the buying activity of Domestic Institutional Investors (DIIs), who purchased stocks worth ₹6,709.74 crore on the same day.
The backdrop to this financial turbulence includes a weak Indian rupee, which is currently trading at ₹92.7870 against the US dollar, and rising Brent crude oil prices, now hovering around $96.59 per barrel. These factors have prompted analysts to warn about potential challenges to India’s macro economy. PL Asset Management has specifically pointed out that the combination of rising crude oil prices and a depreciating rupee could pose significant risks to corporate profitability.
In light of these developments, the market’s short-term direction appears to be heavily influenced by geopolitical factors, crude oil price movements, and FII flows. Analysts at Emkay Global Research have suggested that a ceasefire between the US and Iran could trigger a substantial rally in Indian stocks, indicating that external geopolitical events could play a crucial role in shaping market sentiment.
Despite the current uncertainties, there are signs of resilience within certain segments of the market. Small Cap indices have shown a resurgence, with 60% of companies trading above their 10-day moving average. This suggests that while some investors may be retreating, others are finding opportunities in smaller firms that demonstrate strong fundamentals and clear earnings potential. As one analyst noted, ‘The current uncertain environment requires investors to focus on companies with strong fundamentals and clear earnings potential.’
Looking ahead, the Nifty index is trading at approximately 17.5 times forward earnings, which is below its long-term average. This valuation could indicate potential for growth, especially as Nifty’s Earnings Per Share (EPS) is expected to grow by 13-15% in the fiscal years 2025-27. However, the impact of continuous FII selling on domestic buying remains unclear, leaving investors in a state of cautious anticipation.
As the market navigates these challenges, the future trajectory of crude oil prices and their effect on inflation and GDP growth remains uncertain. Details remain unconfirmed, but the interplay between domestic and foreign investment flows will likely be pivotal in determining the market’s direction in the coming weeks.
