Market Watch

Equity Market Overview – March 2026

Domestic Equity Market Update

Indian equities ended the month on a negative note. Large cap-oriented BSE Sensex ended lower by 11.5% (MoM) and Nifty 50 ended lower by 11.3% (MoM). While the BSE Midcap index ended lower by 11.2% (MoM) and BSE Small cap index ended lower by 10.9% (MoM).

In terms of BSE sectoral indices, the sectors ended on a negative note. Bank Index, Realty and Auto were the detractors during the month.

During the month, FPIs were net sellers in equities to the tune of Rs 1123 bn. (Data as on 27th March). 

Domestic equity markets ended the month on a negative note amid escalating geopolitical tensions, rupee trading at an all-time low on sustained foreign institutional investor outflows and heightened concerns over rising global oil prices. Furthermore, the US Fed’s decision to maintain its policy rate contributed to the subdued market sentiment.

Global Market Updates

US equity markets ended the month on a negative note as lingering uncertainty over US–Iran relations, boiling crude oil prices, elevated treasury yields and inflation concerns weighed on sentiment. Expectations of tighter policy from the US Federal Reserve added further pressure.

European equity markets ended the month on a negative note as mounting tensions in the Middle East and renewed inflation fears prompted investors to avoid risk. Markets declined after the European Central Bank cautioned that inflation could worsen if the conflict continues.

Brent oil prices rose from USD 72.48 per barrel to USD 103.97 during the month as risks of output and supply disruptions dampened expectations of a resumption in export flows through US-led diplomacy following Iran’s hardening stance in peace talks, with oil tanker traffic through the Strait of Hormuz still effectively at a standstill.

Most of the Domestic Macro data points showed a strong picture

According to the Organisation for Economic Cooperation and Development (OECD), India's GDP is projected to grow at 7.6% YoY in FY26 and 6.1% YoY in FY27.

According to Crisil’s latest India outlook, the Indian economy is projected to grow 7.1% YoY in FY27, supported by private consumption and a mild pick-up in private investment.

Fitch Ratings has raised India's GDP growth forecast for FY26 and FY27 to 7.5% YoY and 6.7% YoY, and projected global crude oil price to average USD 70/barrel in 2026.

As per data from the Commerce Department, China overtook the Netherlands to become India’s third-largest export destination in February 2026. Exports to China rose 32.4% YoY to USD 1.67 bn in February 2026, mainly due to a low base.

As per a survey by the National Statistics Office (NSO), India's unincorporated non-agricultural sector demonstrated robust expansion in CY25, recording a 7.97% YoY increase in the number of establishments to 79.2 mn from 73.4 mn in CY24, with employment climbing 6.18% YoY to 128.1 mn workers.

According to a survey by the National Statistics Office (NSO), India Inc’s capital expenditure (capex) plans show moderation in FY27, with aggregate intentions falling 16.5% YoY to Rs 9.55 trillion from the provisional Rs 11.44 trillion estimated for FY26. However, per-enterprise capex on new assets is projected to edge up from Rs 794 mn in FY26 to Rs 852 mn in FY27.

As per data from the Ministry of Commerce and Industry, production growth in eight core infrastructure sectors slowed down to 2.3% YoY in February 2026 from 3.4% YoY in February.

As per data from the Goods and Services Tax Network (GSTN), E-way bill generation rose 18.8% YoY to 132.6 mn in February 2026. 

According to a report by MoSPI, aggregate costs of centrally funded infrastructure projects jumped 16.4% in January 2026 as cost overruns pushed revised estimates to Rs 39.2 trillion from their original cost of Rs 33.7 trillion across 1,702 ongoing projects. However, the cost overrun moderated from 18.3% in December 2025.

According to Crisil Ratings, India's domestic output of urea and complex fertilisers is likely to decline by 10-15% if supply chain disruptions caused by the ongoing conflict in the Middle East persist for 3 months.

According to ICRA, India’s crude oil import bill may jump up by USD 56-64 bn annually if the ongoing surge in global crude prices is sustained and averages at the current level of USD 110–115 per barrel in FY27. Each USD 10 per barrel increase in the average price results in a USD 14-16 bn increase in net oil imports

As per McKinsey & Company, India's chemicals industry, currently valued at USD 155-165 bn, is projected to grow at 8-9% CAGR despite global headwinds and expand to USD 230-255 bn by 2030, driven by emerging high-growth segments.

According to a TeamLease Services report, India's workforce is projected to expand 4.7% YoY in H1 FY27, driven largely by growth in ecommerce, tech startups, healthcare, pharma and manufacturing. 

As per data released by S&P Global, the HSBC Flash India Composite PMI Output Index fell to 56.5 in March 2026 from 58.9 in February 2026, marking the slowest expansion since October 2022.

As per data from the Fintech Association for Consumer Empowerment (FACE), the volume of digital personal loans grew 9.3% YoY to 35 mn loans in Q3 FY26 compared to 32 mn in Q3 FY25.

According to real estate analytics firm CBRE, India’s Real Estate Investment Trust (Reit) market has expanded more than six-fold, growing from Rs 271 bn in FY20 to Rs 1,726 bn in the first nine months of FY26. The growth has been driven by new listings, as well as steady unit price appreciation among existing Reits.

According to a Reuters poll of property analysts, average home prices in India are expected to climb 5% YoY each year through 2028, as developers double down on high-end projects in a market increasingly shaped by rich buyers.

According to data analytics firm NielsenIQ, sales growth of the FMCG industry has moderated to 7.8% YoY in Q3 FY26 amid the GST rationalisation and a high base due.

According to the Gem and Jewellery Export Promotion Council (GJEPC), India's gems and jewellery exports grew 3.86% YoY to USD 2,680.79 mn (Rs 243.40 bn) in February 2026, following the industry's diversification into other markets.

Outlook & Investment Strategy

Going forward, the Indian equity market is likely to be driven by any moves around the final details pertaining to India-US trade deal, crude price volatility, rising concerns over AI-led disruptions, geopolitical tensions, movement in the US Dollar index and INR, improvement in consumption demand, FPI/DII flows and moves by the RBI to support liquidity.

In the ongoing correction due to the Iran conflict, valuations have come off. If the issue sees any signs of resolution or if the Crude oil prices start to decline meaningfully, the Indian equity markets could see uptrend. Also, with that selling pressure from FPIs is also likely to come off, given their underweight stance on India and expected improvement in earnings performance. The Government on its part has rationalised GST rates and is focusing on getting favourable trade deals done to improve the long-term growth potential and domestic consumption. The implementation of the 8th pay commission could also act as a demand driver for the economy in the medium-term. Market participants also expect continued strong liquidity infusion by the RBI to keep growth buoyant. Interestingly, Mutual Funds’ cash, as a percentage of their total AUM, has dipped to recent lows, suggesting that Indian Mutual Funds feel that valuations are right to deploy higher cash. On a trailing basis, NIFTY valuations (P/E) have come down from its long-term average of ~24 times to ~21 times and on a 1-year forward basis, the P/E multiples have cooled to ~17.4 times, which is a recent low.

The US-Iran conflict has emerged as the near-term risk to markets which has driven oil prices higher and has emerged as a near term sentiment-negative event. If the conflict is contained to existing players, investors could use the market volatility due to this event as an investing opportunity.

With improvements in earnings performance, opportunities in the Indian equity market may get more broad-based in the set of stocks which deliver incrementally better revenue/earnings growth. Fund Managers who can be fairly nimble and identify growth ideas could generate alpha vs their peers. While FPIs have been big sellers in the Indian markets, India’s relative underperformance vs its peers in the recent months is likely to gradually make the Indian markets attractive for them. The FPIs’ holdings in Indian markets have also fallen to recent lows which implies that they may not be willing sellers for long.

Investment deployment strategy could be 60% lumpsum and rest 40% to be staggered over the next 3-4 months. Mutual Fund investors can look to focus on categories like Flexicap, Multicap, Large and Midcap, Value and Hybrid funds while using STPs as an instrument to invest in Midcap and Smallcap funds. Aggressive investors may also look at Business Cycle Funds for allocation. All allocations should be done in line with the risk profile and product suitability of the investor.

HDFC Bank is a AMFI-registered Mutual Fund Distributor & a Corporate agent for Insurance products

Disclaimer: This document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. HDFC Bank Limited ("HDFC Bank") does not warrant its completeness and accuracy. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument / units of Mutual Fund. Recipients of this information should rely on their own investigations and take their own professional advice. Neither
HDFC Bank nor any of its employees shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material. HDFC Bank and its affiliates, officers, directors, key managerial persons and employees, including persons involved in the preparation or issuance of this material may, from time to time, have investments / positions in Mutual Funds / schemes referred in the document. HDFC Bank may at any time solicit or provide commercial banking, credit or other services to the Mutual Funds / AMCs referred to herein.

Accordingly, information may be available to HDFC Bank, which is not reflected in this material, and HDFC Bank may have acted upon or used the information prior to, or immediately following its publication. HDFC Bank neither guarantees nor makes any representations or warranties, express or implied, with respect to the fairness, correctness, accuracy, adequacy, reasonableness, viability for any particular purpose or completeness of the information and views. Further, HDFC Bank disclaims all liability in relation to use of data or information used in this report which is sourced from third parties.

HDFC Bank House, 1 st Floor, C.S. No. 6 \ 242, Senapati Bapat Marg, Lower Parel, Mumbai 400 013. Phone: (91)-22-66527100, ext 7111, Fax: (91)-22-24900983 \ 24900858

Mutual fund investments are subject to market risks, read all scheme related documents carefully.

Investments in Specialized Investment Fund involve relatively higher risk including potential loss of capital, liquidity risk and market volatility. Please read all investment strategy related documents carefully before making the investment decision.

Debt Market Overview March 2026

Banking system liquidity as measured by the Reserve Bank of India’s (RBI) net Liquidity Adjustment Facility (LAF) stood at a daily average surplus of ~Rs 1.52 trillion in March 2026 as against a daily average surplus of ~Rs 2.53 trillion in the previous month. The call money market traded in the range of ~4.60-5.30% during the month.

Domestic G-sec yields closed higher in February 2026, and the 10-year benchmark, 6.48% G-Sec 2035 bond, ended at 7.03% compared to the previous month’s close of 6.66%. Indian G-sec yields initially rose as the Middle East conflict pushed crude oil prices sharply higher, intensifying inflationary pressures and currency and growth concerns for the Indian economy, the world’s third-largest oil importer. The sell-off deepened after the central government’s excise duty cut on fuel stoked concerns over the fiscal outlook. The move is expected to have a fiscal impact of Rs 1.50-1.75 trillion in FY27.

As per the US Labor Department, the US Consumer Price Index rose 2.4% YoY in February 2026, the same pace as in January 2026, as rising food and housing costs were offset by falling prices for other items. The US FOMC kept benchmark interest rates steady for the second consecutive time, a move largely in line with market expectations given the increased risk of inflation driven by a war in the Middle East. At present, the target range for the federal funds rate stands at 3.5% to 3.75%. Inflation in the Eurozone accelerated as the Harmonized Index of Consumer Prices rose by 1.9% YoY in February 2026. This followed a 1.7% YoY increase in January 2026. The European Central Bank (ECB) Governing Council left the benchmark interest rate - the deposit rate - steady at 2%. The refinancing rate was left unchanged at 2.15% and the marginal lending rate at 2.40%. The People's Bank of China maintained its one-year Loan Prime Rate (LPR) at 3.0% for the 10th straight session. Similarly, the five-year LPR, the benchmark for mortgage rates, was retained at 3.50%.

India’s CPI-based Inflation rose to 3.21% YoY in February 2026 from 2.74% YoY in January 2026, driven by higher food inflation and continued pressure from rising gold and silver prices. India’s Wholesale Price Index (WPI)-based inflation rose for the fourth straight month, at 2.13% YoY in February 2026, driven by an uptick in prices of food and non-food articles. WPI-based inflation was 1.81% YoY in January 2026. India’s Merchandise Trade Deficit widened to USD 27.1 bn in February 2026 as compared to USD 14 bn in February 2025. Exported goods contracted to USD 36.61 bn in February 2026 amid challenging geo-political developments. Imports grew to USD 63.71 bn due to gold and silver demand. The Centre's fiscal deficit at the end of February 2026 stood at Rs 12.53 trillion, or 80.4% of the annual budget target for FY26, compared to 85.8% in the year-ago period. India’s net direct tax collections grew 7.19% YoY to Rs 22.80 trillion as of March 17, 2026. Gross direct tax collections stood at about Rs 27.15 trillion as of March 17, 2026, marking a 4.86% YoY increase from Rs 25.89 trillion collected during the same period a year earlier. India's net Goods and Services Tax (GST) collection rose to Rs 1.78 trillion in March 2026, registering a growth of 8.2% YoY. Gross GST collections for the month of March 2026 reached over Rs 2 trillion, up 8.8% YoY against Rs 1.83 trillion in March 2025.

The liquidity condition, as measured by RBI’s net LAF, deteriorated, but remained in surplus on average during the month. India’s retail inflation, measured by the Consumer Price Index (CPI), accelerated to 3.21% YoY in February 2026, from 2.74% YoY in January 2026, based on the new series data. The recent slashing of excise duty on petrol & diesel has resulted in concerns around fiscal numbers resulting in near term pressure on bond yields. On the other hand, the probable inclusion of Indian G-secs in Bloomberg’s index, persistent liquidity support, and government’s continuous focus on fiscal consolidation may lead to favorable demand-supply dynamics, resulting in lowering of yields over the medium term. Market participants expect the RBI to continue infusing liquidity to keep system liquidity in surplus. In the US, as widely anticipated and due to ongoing geopolitical disruption, the Federal Reserve kept rates unchanged in the March Policy meeting, keeping their target range at 3.50-3.75%. In the near term, the persisting geopolitical tensions in Middle East, which has pushed crude prices higher, will continue to remain a key monitorable, as every USD 10/bbl increase in the price of crude impacts inflation by 30-40 bps. If crude prices remain elevated for a longer period, it could have an adverse effect on India’s headline inflation, GDP growth and Current Account Deficit.

If India’s nominal growth picks up, it will aid in tax collection. This, along with persistent liquidity support, robust FPI inflows, any positive effect of recently concluded trade deals, and probable de-escalation of the Middle East conflict may aid in keeping liquidity condition comfortable and be a positive for debt yields during latter half of CY27. Thus, at this juncture, with lucrative yields, a case continues to exist for investment into corporate bond funds that are at the 1-4-year segment of the curve. Hence, investors can look at Corporate Bond Funds and Banking & PSU Debt Funds for a horizon of 15 months and above. For a horizon of 24 months and above, investors may consider Income Plus Arbitrage FoF or consider Dynamic Bond Funds for tactical opportunity. As yields in the less than 1-year segment remain tight, investors can consider Money Market Funds for a horizon of 3 months and above. Whereas for a horizon of up to 3 months, investors can consider Overnight Funds and Liquid Funds. Investors should invest in line with their risk profile and product suitability.

HDFC Bank is a AMFI-registered Mutual Fund Distributor & a Corporate agent for Insurance products

Disclaimer: This document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. HDFC Bank Limited ("HDFC Bank") does not warrant its completeness and accuracy. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument / units of Mutual Fund. Recipients of this information should rely on their own investigations and take their own professional advice. Neither HDFC Bank nor any of its employees shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material. HDFC Bank and its affiliates, officers, directors, key managerial persons and employees, including persons involved in the preparation or issuance of this material may, from time to time, have investments / positions in Mutual Funds / schemes referred in the document. HDFC Bank may at any time solicit or provide commercial banking, credit or other services to the Mutual Funds / AMCs referred to herein.

Accordingly, information may be available to HDFC Bank, which is not reflected in this material, and HDFC Bank may have acted upon or used the information prior to, or immediately following its publication. HDFC Bank neither guarantees nor makes any representations or warranties, express or implied, with respect to the fairness, correctness, accuracy, adequacy, reasonableness, viability for any particular purpose or completeness of the information and views. Further, HDFC Bank disclaims all liability in relation to use of data or information used in this report which is sourced from third parties.

HDFC Bank House, 1 st Floor, C.S. No. 6 \ 242, Senapati Bapat Marg, Lower Parel, Mumbai 400 013. Phone: (91)-22-66527100, ext 7111, Fax: (91)-22-24900983 \ 24900858

Mutual fund investments are subject to market risks, read all scheme related documents carefully.

Investments in Specialized Investment Fund involve relatively higher risk including potential loss of capital, liquidity risk and market volatility. Please read all investment strategy related documents carefully before making the investment decision.