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The year 2026 is shaping up to be the worst for domestic equities in more than a decade, as a combination of weak global and domestic factors has added persistent downward pressure on Dalal Street, pushing the market into double-digit losses. Bulls had hoped that this year could be another record-breaking year for equities, as recent economic reforms and higher capex spending could fuel the rally. However, those expectations soon faded after the US launched attacks on Iran in February, which completely changed the domestic equity backdrop for the worse. Domestic conditions were also challenging for bulls, as a falling rupee, limited exposure to AI, weakening agricultural conditions, and sustained selling by overseas investors have put the Nifty 50 on track for its first annual decline in a decade. In the current year, the index has crashed 13.5% so far, positioning it for its biggest annual decline since 2011, when it plunged 24.62%. Major contributors to the index's decline were tech stocks, including Infosys, Wipro, and TCS. They were followed by Reliance Industries and ITC. Over the last two decades, the index has logged double-digit losses only twice. From 2016 to 2025, the markets enjoyed an uninterrupted bull run, closing each of those years in the green. If not for the ongoing support from domestic mutual funds, largely backed by retail investors, the losses could have been even steeper. Notably, the losses are not limited to Indian stocks, as other major Asian markets such as South Korea, Japan, and Hong Kong have also registered multiple record highs, with chip stocks providing significant support. Crude oil remained a major headwind for market recovery as prices, which started marching higher in February, have continued to remain elevated, creating upward pressure across sectors ranging from consumer goods to transportation. The price of Brent crude, the most actively traded benchmark in the oil market, has continued to remain above $100 per barrel, sending inflationary pressures across the world. The impact has been particularly significant for India, which meets around 80% of its crude oil demand through imports. Any wild swings in prices can have ripple effects on the economy, and the longer crude remains elevated, the weaker the chances of a sustained market recovery. The upward pressure on inflation is also weighing on the global bond market, as investors demand higher compensation amid growing risks and expanding budget deficits. Major economies have already started feeling the impact of higher oil prices, as inflation runs ahead of the central bank's target range. With recent rate hikes by the US Federal Reserve, Bank of Japan, and European Central Bank, concerns have mounted that the RBI could take tightening measures at its October meeting. In a high-interest-rate environment, equities generally lose some of their appeal as higher borrowing costs push up corporate funding costs, potentially hurting bottom-line profits and, in turn, impacting valuations. Meanwhile, lower rainfall due to El Niño and volatile input costs driven by the war in the Middle East have put the rural economy under pressure. This is significant given that the agriculture sector accounts for about 18% of the Indian economy and employs 43% of the workforce. A combination of these factors has led overseas investors to pull billions of dollars from the Indian stock market, with analysts expecting selling to persist amid expectations of further US Fed rate hikes. In addition, India's relatively limited AI exposure has been seen as one factor reducing its appeal to overseas investors, contributing to continued pressure on domestic equities. Bajaj Alternate Investment Management Limited said India's long-term structural outlook continues to improve and expects the market may experience some near-term correction depending on the interest rate outlook, after which attention should shift to festive season demand, spending ahead of the UP election, and the 8th Pay Commission pay increase in the medium term. It concerns the persistence of wage growth and job quality, especially since more than two-thirds of India's 1.44 billion population is under the age of 35 and labour market slack remains. With NPAs at all-time lows in the banking sector and corporate balance sheets significantly stronger, Bajaj said India's GDP is poised to surprise on the upside. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions. Ksheera Sagar has been working as a Market Research Analyst at LiveMint for the past four years, covering stocks, commodities, and broader financial markets. In this role, he closely tracks daily market movements, corporate earnings, sector trends, and macroeconomic developments. <br><br> He has over a decade of experience in the financial services industry and has previously worked with multiple organisations, including global investment bank J.P. Morgan, bringing strong research experience into the newsroom. <br><br> During his career, he has gained extensive exposure to equity research, market analysis, and financial data interpretation, strengthening his expertise across asset classes and market cycles. <br><br> He is known for his data-driven analysis and crisp, listicle-style market stories that break down complex financial developments across key markets for a wide audience. His strong research skills enable him to write detailed and insightful stories on stocks and sectors, focusing on the underlying factors driving market movements. <br><br> His work combines quantitative insights with clear storytelling, presenting financial developments in a clear and structured manner. Moreover, he enjoys writing multibagger and listicle-style copies. Outside of work, Ksheera enjoys playing the piano and exploring new places. He has a keen interest in travel, music, and continuously learning about global markets and economic trends. Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates. Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.
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