Nifty 50 tanks 11% in March— Why 'buy-on-dips' may not be the right market strategy now

Stock market crash: Indian equity benchmark Nifty 50 extended losses for the fourth consecutive month in March, after crashing more than 11% this month due to concerns over a sharp rise in crude oil prices driven by the US-Iran war, the rupee's weakness, and massive foreign capital outflow.

As many as 15 Nifty 50 stocks, including Tata Motors PV, Bajaj Finance, SBI, L&T, HDFC Bank, Maruti, Axis Bank, and UltraTech Cement, crashed more than 15% in March. 27 Nifty 50 stocks crashed more than 10% in March.

The Nifty scaled its record high of 26,373 on 5 January this year. Since then, the market benchmark has been reeling under selling pressure amid growing concerns over geopolitical headwinds. On Monday, 30 March, the index crashed 2.14% to end at 22,331, over 15% below its record high.

A steep decline from record high levels has brought market valuations to more comfortable levels, raising speculation about whether this is the right time to buy the dips.

Is the market ripe for a sustained rally?

An end to the West Asian war, and the resulting crash in crude oil prices, may trigger a sharp rebound in the Indian stock market.

However, the rally could be short-lived, as the focus may shift back to the lingering impact of elevated crude oil prices on the broader economy and corporate profitability.

Additionally, it may take time for crude oil prices to return to normal levels due to damage to energy production and supply infrastructure.

"This does not appear to be an ideal market to deploy fresh capital. It may be prudent to wait for greater clarity on the trajectory of the ongoing conflict, its duration, and the resulting impact on crude oil prices," Shankar Sharma, stock market veteran and founder of AI-tech firm GQuant Investech, told Mint.

Sharma pointed out the risk of elevated crude oil prices and their impact on India's macroeconomic outlook.

"The escalation of tensions in West Asia has already begun to weigh on India’s macroeconomic outlook in the near term. Higher energy prices could widen the current account deficit, fuel inflation, and put pressure on fiscal balances," he explained.

"If these risks persist, they are likely to affect corporate earnings and, in turn, market returns. India, anyway, is an ageing bull market. Geopolitical risks have added another major headwind. In moments like this, it is better to wait a bit and let the market stabilise and even go up before you buy in size," said Sharma.

Many other marker experts share similar concerns. The duration of the war is a crucial factor for the market. There is total uncertainty about this. The longer the war lingers, the stronger the headwinds for the economy will be, which will again be reflected in the market.

"The Goldilocks macro scenario, which India had before the war, has almost disappeared thanks to the war. Instead of high GDP growth, low inflation, moderate fiscal and current account deficits and expectations of higher corporate earnings growth in FY27, now we face grim prospects of lower GDP growth, higher inflation, higher fiscal and current account deficits and lower earnings growth for FY27," VK Vijayakumar, chief investment strategist at Geojit Investments, said.

Global financial firm Goldman Sachs has downgraded Indian equities to "marketweight" from "overweight", highlighting increased risks of worsening macro and slowing earnings growth. It has also lowered India’s 2026 GDP growth forecast by 1.1% to 5.9% and raised CPI (Consumer Price Index) forecast by 70bps due to the country's significant vulnerability to energy shock.

The financial firm has lowered India Inc.'s earnings growth forecasts to 8% and 13% for the calendar years 2026 and 2027, respectively. Prior to the West Asia conflict, the financial firm expected earnings growth of 16% in 2026 and 14% in 2027.

It also cut its Nifty 50’s 12-month target to 25,900 from 29,300 previously, based on earnings growth of 8% in CY26 and 13% in CY27 and 19.5 times target PE.

A lot will depend on the duration of the war, which has already dragged on for more than a month now. An early resolution will dispel the gloom, but if the war lingers, there could be more pain in store for the Indian equities.

"Everything boils down to the duration of the war. For instance, if crude trades around $120 for the next three months, Indian macros will be hit hard, and the market will also take another hit. On the other hand, if de-escalation occurs soon, the impact on the economy will be a one-time hit, not affecting long-term growth and earnings prospects. In such a scenario, the market will rebound sharply," Vijayakumar said.

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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.