Six Years of Euphoria, Then the Market Pendulum Swings

Six Years of Euphoria, Then the Pendulum Swings

There is a rhythm to markets that most investors sense but few act on wisely.

"We may never know where we're going, but we'd better have a good idea where we are." - Howard Marks

For nearly six years — from the pandemic lows of March 2020 through much of 2025 — Indian equity markets delivered a remarkable bull run. The Nifty 50 climbed roughly 3.4 times from its Covid trough of 7,610 to a peak above 26,000 in September 2024.

Then the pendulum swung.

A Sudden Turn

Early 2026 still carried that optimism. Macro indicators were improving, the government had delivered a consumption-friendly budget, and FPIs turned net buyers in February, adding over ₹22,600 crore.  

On February 28, the picture changed sharply. US and Israeli forces struck Iran — targeting 47 sites in what President Trump called "Operation Epic Fury." Iran closed the Strait of Hormuz, disrupting roughly 20 per cent of global oil flows. Brent crude crossed $100 per barrel. The IEA called the resulting supply shock the greatest energy security challenge in history.

For India — the world's third-largest oil importer and second-largest LPG consumer — the fallout was swift. The Sensex fell nearly 9,340 points, or 11.5 per cent, in March. Market capitalisation of BSE-listed companies dropped by over ₹50 lakh crore, an erosion of more than $534 billion. The rupee slid to 95.14 against the dollar.  

The Iran war did not cause a change in India's structural fundamentals. But it punctured the mood — and in markets, mood matters enormously.

Second-Level Thinking in a Crisis

The most important thing to remember is how much we do not know — nobody knows the duration of the conflict, the scope of escalation, or the outcome. At such moments, investors are most prone to decisions they later regret.

A first-level response to March 2026 is straightforward: oil is surging, inflation will spike, consumption will fall — sell everything. The second-level question is different: has the worst case already been priced in? Are sound businesses being sold alongside speculative ones? Following the herd into panic is unlikely to produce good long-term results either.

That said, caution is not unreasonable here. India's energy dependence is a genuine structural vulnerability. It has zero strategic LPG reserves, imports 85 per cent of its cooking gas, and a prolonged Hormuz closure could affect over 300 million households. The concerns driving the selloff are not imaginary.

"I don't know anyone who has consistently made money from macro-forecasting" – Howard Marks

The more productive exercise is positional awareness: reading the signals the cycle is sending and adjusting accordingly.  

What History Suggests — With Caveats

Historical data offers some comfort, though it comes with the standard disclaimer that past patterns need not repeat. A study of six major geopolitical shocks between 1990 and 2026 shows they typically lasted about four weeks, with average Sensex returns of roughly 28 per cent in the three months following the trough and 38 per cent over six months. The Russia-Ukraine episode of early 2022 is a recent parallel — the Nifty fell about 11 per cent on surging crude and aggressive FII selling, then recovered fully within a month.

Of course, the present conflict carries its own distinct risks: a more direct oil supply disruption, a weaker rupee, and a global economy already navigating elevated interest rates. None of this guarantees a swift rebound. But history does suggest that panic selling during geopolitical shocks has generally been costlier than patience.  

The six years of euphoria taught a generation of Indian investors that markets mostly go up. The Iran war is teaching them that markets are cyclical.  

The pendulum will swing again. It always does. The question worth sitting with is whether you are positioned — emotionally and financially — to stay steady when it does.