Mumbai: The benchmark Sensex has fallen more than 20% so far in 2026 in dollar terms, the steepest in 15 years, as the rupee’s weakening has amplified losses for overseas investors. The Nifty has declined 18.6% in dollar terms, with both indices emerging as the second-biggest laggards among major global markets after Indonesia.
In rupee terms, the Sensex has declined 14.9%, while Nifty has lost 13.1% so far this year.
ET Bureau
Foreign investors track the performance of overseas markets in dollar terms as their portfolio returns are typically measured in the US currency. A weaker rupee reduces their returns when Indian investments are converted back into dollars.
“The rupee’s depreciation has adversely impacted returns in dollar terms, but the main cause of poor year-to-date returns is driven by the weak sentiment towards Indian equities,” said Pratik Gupta, managing director and CEO of Kotak Institutional Equities.
Indian stocks have fallen out of favour with foreign investors since end-September 2024 amid slowing earnings growth, a shift toward AI-fuelled markets such as South Korea and Taiwan, US tariffs and, more recently, the spike in oil prices following the West Asia war. The rupee has declined 6.4% so far this year.
The contrast with several global markets has been stark. In the US, the S&P 500 has gained 12.2% so far in 2026, while the Nasdaq and Dow Jones have risen 15% and 7%, respectively.
In Europe, meanwhile, the FTSE 100 has gained 6%, while the CAC 40 has declined 4% and the DAX has risen 0.8%.
Asian markets have also largely outperformed Indian equities. Japan’s Nikkei has gained 30%, while Hong Kong’s Hang Seng has declined 6% and China’s Shenzhen index has risen 0.8%. Taiwan and South Korea’s Kospi have gained 61% and 72%, respectively. Indonesia’s Jakarta Composite and the Philippines index have declined 34% and 11%, respectively.
The Sensex is in a bear market if measured in dollar terms, having fallen more than 20% so far in 2026. A decline of 20% or more is widely regarded as the threshold for a bear market.
Saion Mukherjee, head of India equity research at Nomura, said the 20% decline itself should not be viewed as a definitive threshold for a bear market, but the correction could affect investor sentiment and fund flows.
“Is it like 20% is a bear market? You can call it in some definition, but no line says 15% or 20%,” he said. “The bigger point is how this correction impacts investor sentiment and domestic flows.”
Cushioning FPI outflows
In the past year, foreign portfolio outflows of over ₹2.17 lakh crore have been offset by strong domestic mutual fund inflows of ₹4.98 lakh crore, cushioning the market from a sharper drop.
“People have been coming in and supporting the market whenever there is a fall. Will they continue to do that?” said Mukherjee. “The amount of money that’s coming into mutual funds as a percentage of financial savings has been at a pretty elevated level in the last four-five years. For incremental investors to come and keep supporting and put money would require the market to be a bit supportive. I think that’s a challenge.”
The Sensex’s dollar-denominated market capitalisation has declined by more than $372 billion so far in 2026, with 10 stocks accounting for around 80% of the erosion.
Market cap erosion
Reliance Industries has seen the largest decline, with its market capitalisation falling by nearly $70 billion, followed by HDFC Bank and TCS, with declines of around $54 billion and $52 billion, respectively.
Infosys and ITC have recorded market-cap erosion of around $32 billion and $22 billion, respectively, while Maruti Suzuki India and Bharti Airtel have each seen declines of around $19 billion. Hindustan Unilever and Mahindra & Mahindra have seen their market capitalisation fall by around $15 billion each.
ET Bureau