Twelve months of tariff wars, border conflicts, an AI revolution, and a crude oil shock that erased a year's gains — the unfiltered story of FY26.
Dear Investor,
It's that time of the year again — when we pause, reflect, and put our thoughts on paper with honesty.
FY26 was not the year we hoped for. And we want to say that plainly, without dressing it up. This was a year that punished patience in the short term, not because our thesis was wrong, but because the world kept throwing curveballs that no research model can anticipate — a trade war that escalated overnight, a four-day military conflict on our borders, and in the final weeks, an oil crisis that the IEA called the worst since the 1970s.
And yet — and this is the part we need you to stay for — FY26 built something. The sectors we have conviction in spent this entire year accumulating orders, winning contracts, proving capabilities, and attracting global capital commitments of a scale India has never seen. The story hasn't been told yet in stock prices. But it will be.
This letter is our attempt to chronicle FY26 as it actually happened — event by event, month by month — and to help you see what we see: a year that felt forgettable but prepared the ground for the next bull run.
April 2025 → March 2026 · Index levels (approximate)
FY26 didn't start clean. The Nifty 50 had peaked at 26,277 on September 27, 2024 — then declined for five consecutive months. The first such streak in 29 years.
By March 4, 2025, the index hit 21,964 — a 16.4% peak-to-trough fall. Mid-caps fell 18%. Small-caps lost 21%. PSU stocks cratered 26%.
October 2024 alone saw ₹1.14 lakh crore in FII outflows — the single largest monthly FII sell-off in Indian market history. Foreign investors were rotating to Chinese equities after China's stimulus announcement.
Three root causes: weak Q2 FY25 earnings (Nifty profit growth just 2.2% YoY), GDP slipping to 5.4% in Q2, and the rupee sliding from ₹83.5 to ₹86.5.
FM Nirmala Sitharaman delivered a Budget that immediately changed the national mood. The headline: zero income tax on earnings up to ₹12 lakh per year. For the first time in decades, India's salaried middle class got a genuine windfall.
The Section 87A rebate doubled from ₹25,000 to ₹60,000. Total money back in consumer pockets estimated at ₹1 lakh crore annually — the largest middle-class tax relief since liberalisation.
"This budget is by the people, for the people."
| Budget Highlight | Detail |
|---|---|
| Tax-free income | Up to ₹12L (₹12.75L salaried) |
| Section 87A rebate | ₹25,000 → ₹60,000 |
| Capital expenditure | ₹11.21 lakh crore (3.1% GDP) |
| Defence allocation | ₹6.81L cr (+7.6% YoY) |
| Fiscal deficit target | 4.4% of GDP |
| FDI — Insurance | 74% → 100% |
| Consumer boost | ~₹1 lakh crore annually |
On April 2, 2025, President Trump signed a declaration of "national emergency" targeting the US trade deficit with reciprocal tariffs on 180+ countries. India's rate: 26%.
April 7 — "Black Monday": Sensex opened down 3,914 points. Nifty hit 21,743. India VIX surged 59%. ₹29 lakh crore (~$345B) wiped in a single session.
Two days later, Trump announced a 90-day pause on all tariffs above 10%. The S&P 500 surged 9.52% — its best single day since 2008. Indian markets recovered fully in 12 days.
"We stand at a moment in history where India is well poised to convert the current situation into an opportunity."
A terrorist attack in Pahalgam on April 22 killed 26 civilians. India's response — Operation Sindoor — was the most significant India-Pakistan military confrontation since 1971. Nine terrorist infrastructure sites struck across PoK and Pakistan's Punjab province. 114+ aircraft. The first jet-era dogfight between two nuclear-armed states.
Markets showed something remarkable: they didn't break. On May 7, the Sensex opened down 692 points but closed UP 106 points. When ceasefire came on May 10, the relief rally made history.
FII net buying during May 1–11 reached ₹14,167 crore — their highest buying stint of 2025. Institutional investors were positioning through the conflict, not fleeing it.
The RBI under Governor Sanjay Malhotra engineered the most aggressive domestic easing cycle in six years. Three cuts in eight months totalling 100 basis points — repo rate from 6.25% to 5.25%.
CPI inflation collapsed to a historic low of 0.25% in October 2025 — nine consecutive months of falling food prices. India simultaneously delivered 7.8% GDP growth in Q1 and 8.2% in Q2.
The RBI also cut CRR by 100 bps to 3%, releasing ₹2.5 lakh crore into the banking system. Home loan rates fell below 8% for the first time since 2022.
The 56th GST Council's September 3 decision was the most sweeping tax reform since 2017. The 12% and 28% slabs effectively abolished — replaced with a cleaner 0%–5%–18% structure. PM Modi had previewed it from the Red Fort on Independence Day.
While headlines screamed tariff wars, India's trade diplomacy was quietly delivering what 30 years of negotiations couldn't. In a single financial year, India signed more significant trade agreements than in the previous decade combined.
| Agreement | Date | Scale & Significance |
|---|---|---|
| India-UK CETA | July 24, 2025 | Eliminates tariffs on 99% of Indian exports — textiles, leather, gems, engineering goods |
| India-EU FTA | Jan 27, 2026 | "Mother of all trade deals" — 2B people, ~25% of global GDP. 20 years in the making |
| India-US Bilateral | Feb 7, 2026 | India tariff: 26% → 18%. $500B purchase commitment over 5 years |
| India-Oman CEPA | Dec 2025 | Gulf market access — pharma, food, textiles |
| India-New Zealand FTA | Dec 2025 | Tech, dairy, pharma |
| China pharma duty | Sep 2025 | 30% → 0% on Indian pharma. Opens $10–15B duty-free market for APIs & generics |
EU Commission President Ursula von der Leyen called the India-EU FTA "the mother of all trade deals" — a free trade zone of 2 billion people covering ~25% of global GDP. The largest trade arrangement in history by population.
Indian IT services stocks fell ~25% in CY2026 — worst in a generation. Yet $277+ billion in AI infrastructure was pledged in India in the same year.
Two specific AI shocks hit IT hardest. DeepSeek (Jan 27, 2025) triggered a 3.36% Nifty IT crash. Then Anthropic's "Claude Cowork" (Feb 4, 2026) caused a 5.76% IT crash in a single session.
But the deeper story was nuanced. TCS's AI revenue hit $1.8B annualised (+17% QoQ). Infosys raised revenue guidance. Every major IT firm was pivoting — not dying.
"AI will add roles and workloads, not job cuts."
On February 28, 2026, the US and Israel launched "Operation Epic Fury" against Iran. Iran's retaliation was unprecedented: on March 4, Iran effectively closed the Strait of Hormuz — 21+ confirmed attacks on merchant vessels reduced tanker traffic to near zero. The IEA called it the largest energy supply disruption since the 1970s.
India's 85–90% crude import dependence means a single month of $100+ oil erased an entire year of market gains. This is the exact reason our Energy Transition thesis — Battery Energy Storage, green hydrogen, domestic renewables — is not just an investment theme, but a national imperative.
"The pattern is unmistakable: disruption creates dislocation, and dislocation creates opportunity for investors with conviction and a clear framework."— Niveshaay Geopolitical Letter · March 2026
In our March 2026 geopolitical letter to AIF investors, we wrote that every major crisis in Indian markets has been a point of reset — not an endpoint. FY26 is the latest chapter in a very long and consistently reassuring history.
| Event | Date | Initial Reaction | 12–18 Month Outcome |
|---|---|---|---|
| 9/11 Terror Attacks | Sep 2001 | Global crash; Sensex multi-year lows | 2003–08 bull run; Sensex ~7x |
| Global Financial Crisis | Sep 2008 | Sensex fell 50%+ | Recovered 100% by 2010 |
| COVID-19 Crash | Mar 2020 | Nifty –40% in 46 sessions | +96% in 12 months |
| Russia-Ukraine War | Feb 2022 | Sensex –5% in a day; oil spiked | +31% over 2 years; defence re-rated |
| Trump Tariff Shock | Apr 2025 | Sensex –5.19%; ₹29L cr wiped | Recovered in 12 days; trade deal Feb 2026 |
| Iran-Hormuz Crisis | Mar 2026 | Nifty –10.5%; oil $119/barrel | History says recovery will follow |
"Markets often conflate price and value during periods of fear. We do not. Growth is not the challenge — sentiment is. And sentiment, by its nature, is temporary."
FY26 was a year of building, not harvesting. The sectors we have allocated to are in the early stages of multi-year structural growth curves. Capabilities built take time to reflect in stock prices — but once they do, the rewards are enormous and durable.
It is years like FY26 where portfolios are prepared, not rewarded. The tariff shock, the India-Pakistan conflict, the Iran-Hormuz crisis — each came with almost no warning. Each hit portfolios hard. We acknowledge that with honesty.
But here is what we are deeply confident in: the structural thesis did not just survive FY26 — it was validated by it.
India's defence indigenisation was battle-tested and proven in live combat. The three largest trade deals in India's history were signed in a single year. The AI infrastructure buildout that will power India's next decade was committed — $277 billion worth. The monetary cycle has turned. Corporate balance sheets are the healthiest in over a decade.
What we are watching closely is the resolution of the Iran conflict and oil normalisation. Those two variables will determine H1 FY27 more than anything else. But beyond that uncertainty — which is temporary — the structural story is intact, and in fact stronger than when FY26 began.
"Capabilities built take time to reflect in stock prices. But once they do, the rewards are enormous and durable. We believe FY27 is the year these capabilities start showing up in earnings."
Warm regards,
Team Niveshaay
March 2026 · Annual Letter · AIF Investor Edition