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According to PL Asset Management, the asset management arm of PL Capital Group (Prabhudas Lilladher), a sharp global energy shock and rising stagflation risks triggered a synchronized selloff across asset classes in March 2026, leading to a systemic correction in equity markets worldwide, including India.

While global markets witnessed broad-based de-risking, Indian equities demonstrated relative resilience, supported by strong domestic macroeconomic fundamentals and robust institutional liquidity.

Global markets: Energy shock drives synchronized selloff

According to PL Asset Management, March was characterized by a regime change, whereby equities, bonds, currencies, and even the traditional safe haven assets declined simultaneously.

Prices for crude oil surged 52% after disturbances occurred in the Strait of Hormuz. This led to a rise in inflation rates globally, compelling the central banks to take the “higher-for-longer” interest rate policy approach.

Most of the major indices declined globally, including the KOSPI in Korea, which fell by over 19%, and Nikkei in Japan, whose decline was at more than 13%.

Historically, sharp moves in crude oil have had a direct impact on equities through inflation, margins, and liquidity conditions, making oil a key variable in the current macro cycle.

India: Systemic correction, not sector rotation

In India, the Nifty 50 fell by 11.3% during the month of March, with the decline being systemic rather than sector-specific, implying that there was systemic risk aversion in the market rather than any sector rotation.

The leading sectors in terms of their declines included PSU banks, realty, automobiles, and financials, with even defensive sectors like FMCG and pharma failing to offer any cushioning effect.

Historical Nifty 50 Drawdown Analysis – Forward Returns

At a current drawdown of 15%, markets have entered a zone that has historically delivered strong forward returns despite near-term volatility. Past episodes show that corrections in the 10–20% range have led to meaningful recovery, with improving return potential over 3–12 months. While some downside risk may persist, the probability-adjusted outcomes become increasingly favourable at these levels.

Siddharth Vora, Head – Quant Investment Strategies & Fund Manager said, “ "March 2026 marked a liquidity-driven, macro-led correction rather than a fundamental reset, with forced deleveraging amid an energy shock and tightening financial conditions. That said, the current setup increasingly reflects a late-stage correction, not the beginning of a prolonged downturn. Quantitative indicators — breadth, sentiment, and positioning — are in extreme oversold territory, historically associated with market inflection points, and past drawdowns of similar magnitude have delivered strong forward returns”

Early signs of stabilization are emerging across key macro variables — crude momentum is moderating, while the US dollar and bond yields appear to be peaking. Market internals are also transitioning, with early factor rotation suggesting selective value buying is underway.

While near-term volatility may persist, India's structural drivers remain intact. We are evolving from a defensive stance toward a more selective, opportunity-driven approach — focusing on quality and segments where recent dislocations have created favourable medium-term entry points."

Macro pressure cycle intensifies

PL Asset Management cited the emergence of an accelerating macro transmission cycle due to escalating oil prices that affected profit margins, causing inflation to rise, and monetary conditions to tighten. Discounts and profits were hit simultaneously owing to the increased risks, making it tough for the equities market. The foreign institutional investors (FIIs) showed high net outflows of around Rs.1.22 lakh crore, which was one of the highest outflows observed.

Domestic resilience provides cushion

In spite of all this, India continued to show strong economic fundamentals, with industrial production growing by 5.2% and inflation being within the target range of the RBI. The strong domestic institutional investor flows of Rs.1.43 lakh crore helped in offsetting foreign outflows. This was a very important factor for equities.

Valuation reset creates opportunity

This has resulted in a significant reset of valuations, providing better risk-reward dynamics for the investment community over the medium term. According to PL Asset Management, valuation metrics have reached levels that have been historically consistent with healthy forward performance over a six- to twelve-month period.

But it added that investors need to be cognizant of earnings-related risks, which may render the currently comfortable valuation environment deceptive.

Value Meter – Historical Valuation Index

India is looking attractive. The Value-Meter has declined sharply from 0.55 in mid-2024 to 0.18 in March 2026 — its lowest reading since the COVID lows of 2020 and firmly in the attractive zone (below 0.25). Historically, readings at these levels have preceded strong medium-term market recoveries. While near-term macro headwinds persist, the valuation signal for patient, long-horizon investors has rarely been this compelling.

Strategy performance: Resilience amid volatility

PL Asset Management highlighted that its flagship AQUA strategy demonstrated relative resilience during the sharp market correction AQUA navigated the sharp March 2026 drawdown with relative resilience, supported by factor positioning and prudent cash allocation.

The strategy delivered returns of –11.01%, outperforming the BSE 500 TRI (–11.37%) during a broad-based market selloff. The portfolio's 11.26% allocation to cash and liquid instruments played a key defensive role, cushioning downside risk amid heightened volatility.

From a factor perspective, the portfolio maintained a meaningful overweight to Growth, which emerged as one of the more resilient factors during the month and played a key role in limiting downside. This was complemented by diversified exposure across Momentum, Value, and Quality, ensuring balance across factor regimes despite the challenging environment.

On the sector front, exposure to Healthcare (8.67%) and Energy (7.77%) contributed positively, as both sectors outperformed in the weak market environment. At the stock level, key contributors included Aurobindo Pharma (+10.88%), National Aluminium (+10.09%), and Coal India (+5.43%), which delivered strong absolute returns despite broader market weakness. From a market-cap perspective, the portfolio maintained a relatively defensive stance with 54.93% in large caps, 27.20% in mid-caps, and 6.61% in small caps, alongside cash holdings, aligning well with the risk-off environment.

Since inception, AQUA has delivered annualized returns of 16.73%, continuing to outperform its benchmark return of 10.29%, reinforcing the strength of its disciplined, factor-driven investment framework across market cycles.

Cautious optimism ahead

Although the immediate risks from higher oil prices, inflation, and international finance remain, PL Asset Management feels that the Indian story remains fundamentally intact. The company recommended that investors move their attention away from maximizing returns and concentrate on protecting capital, while gradually building exposure to new investment avenues.

From a historical perspective, the Nifty 50 has delivered strong long-term returns despite periods of sharp drawdowns, highlighting the importance of staying invested through market cycles

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