Market Sell-Off – Time to reassess your portfolio exposure overall

FPI selling picks up in March 2026

In the first week of March, FPIs sold almost as much equities as they bought in February. Clearly, the euphoria of the Indo-US trade deal appears to have slowly faded away. With the 50% rally in crude oil price to $90/bbl, there are concerns about the ability of the Indian economy to sustain its macro robustness. Not surprisingly, FPIs sold Indian stocks worth $2.3 billion in the first week of March. Apart from the fear factor, as evidenced by the sharp spike in VIX to 19.88 levels, the USDINR also weakened back to ₹92/$. As dollar hedging picked up and NDF market saw rupee selling, even the RBI intervention by selling dollars did not make much of a difference. That also spooked FPIs.

Generic market indices go for a toss

As the Nifty corrected -2.89% during the week amidst the oil & gas panic, even the small and mid-cap stocks were not spared. For instance, the Mid-Cap 100 corrected by -2.91%, while the Small Cap 100 also corrected by -2.54%. Normally, one would have expected the smaller stocks to correct harder amid a falling rupee and spike in oil prices, but that may become evident in the coming days. Even the Nifty Next 50 corrected by -3.21% for the week, indicating that there were no market cap classes that were immune to the sharp correction in the markets. Even the Nifty Micro Cap index was down -3.91%, indicating that there was really no hiding from macro-level selling.

Most sectoral indices also took a hit

Some of the defensive sectoral indices like IT and FMCG took less of a hit, but the more cyclical names like banking and auto were hit hard by the sell-off in the markets. Autos corrected -3.84% and banking corrected -4.54%. While autos were hit by concerns over a spike in fuel costs, banks were more concerned that a spike in inflation could result in bond yields going up sharply. Within the banking space, the PSU banks gave up a good deal of their recent gains. FMCG at -2.3% and IT at -1.5% were relatively better off. IT normally benefits from a strong dollar, but that hardly mattered. Pharma inched up marginally, but amid rising export costs, that could also change.

What should investors do in this market?

A standard question that arises is; what should investors be doing now? The immediate reaction may be to jump in and buy the correction. However, that may be premature, considering that the impact has just started manifesting itself. Would it be a good time to dump and walk out? We are not seeing even the institutions do that, so clearly risks appear to be short-term. What investors need to do is to reassess and restructure their portfolio. Investors who went overweight on gold, silver, metals; must reassess if it is time to shift back to the real growth stories. Remember, most wars have formed the base for a big stock market rally. That is the more optimistic side of the story!