For most of March, markets moved in a somewhat uneven manner on the back of escalating tensions in the Middle East. Equities declined and oil prices soared as the world shifted from relative stability to more fragility. Against that backdrop, India’s stock market benchmarks fell over 11%, marking their worst monthly performance in six years.
This is typically when investors step back, but not this time. This time, the flow moved the other way. Inflows into equity mutual funds jumped 56% from February to Rs 40,450 crore in March, an eight-month high. SIP contributions hit a record Rs 32,100 crore, with contributing accounts rising to 9.72 crore.
At one level, this can be explained mechanically. Retail investors operate on fixed schedules via SIPs, and financial year-end allocations often support March flows. But that explanation, while correct, is incomplete.
The more important shift is behavioural. Corrections are beginning to be used differently. As falling prices eased valuation concerns built up over the past year, investors doubled down.
What appears as confidence may, in practice, be a response to changing entry points rather than conviction. There are also signs of this adjustment within portfolios. After falling to multi-year lows, exposure to the technology sector rose a tad in March to 7.3% from 6.9% in February, even though the sector declined during the month.
This is not a broad shift in outlook. Fund managers continue to frame this as tactical rebalancing rather than a trend reversal, adding selectively after a period of underweight positioning, while uncertainty around global demand and earnings recovery persists. Prices have adjusted faster than clarity.
At the same time, the external environment remains unsettled. Foreign investors sold a record $12.7 billion worth of Indian equities in March, reflecting concerns around oil prices and their implications for inflation and growth.
The transmission is relatively direct. Higher oil prices feed into inflation expectations. That, in turn, complicates the outlook for interest rates, currency stability and corporate margins, particularly in an import-dependent economy.
Domestic flows, by contrast, have remained steady. This creates a layered market. One set of investors is responding to global risks and macro uncertainty. Another is responding to periodic investment discipline and improving valuations. Neither is necessarily making a directional call. They are operating on different time horizons.
Over the past fortnight, markets have shown signs of recovery. Benchmark indices have moved higher, tracking broader gains across Asian markets, as expectations of renewed talks between the US and Iran have brought oil prices off their highs. More sectors have begun to participate in the recovery, including financials and IT.
But here too, the move reflects expectations rather than outcomes. Markets are beginning to price in the possibility of de-escalation, not its certainty. The more useful question, then, is not whether flows were “right” in March. It is what they indicate about how investors are processing uncertainty.
There is a visible shift from reactive behaviour to more structured participation — from timing the market to staying invested through it, and from responding to headlines to responding to valuations.
Seeing Through Uncertainty
At a time when markets are adjusting to shifting risks, the passing of Mark Mobius offers a useful contrast in how uncertainty is approached. Mobius, pioneer of emerging markets investing, was 89.
Investors often respond to unfamiliar markets by stepping back—citing opacity, governance concerns, or volatility. For much of his career, Mobius did the opposite. He treated those same conditions not as barriers, but as starting points for inquiry. That difference in approach shaped both his method and his influence.
Rather than relying primarily on models, Mobius built his approach around direct observation—travelling extensively, meeting companies and policymakers, and forming views from on-the-ground context. Over time, that method helped him identify opportunities in emerging markets that institutional capital had largely avoided.
As emerging economies opened and global capital began to expand its reach, Mobius became one of the more visible advocates for investing beyond developed markets. His work at Franklin Templeton helped build one of the earliest large-scale platforms dedicated to these geographies.
In his writing, Mobius emphasised that understanding markets required understanding the people and systems behind them—an approach that prioritised context over abstraction. Mobius’s approach was to engage with that uncertainty early, when it was least understood and often most mispriced.
That does not mean it always worked, or that such opportunities are easy to identify. But it does suggest a different framing. Uncertainty is not just a source of risk. It is also where assumptions are least settled.
Markets are still trying to assess how to price that uncertainty. What Mobius leaves behind is less a set of calls than a way of approaching that process—one that looks more closely at what is unclear, rather than stepping away from it.
Testing the Assumption
Markets have long assumed that weaker monsoon rainfall translates into weaker economic growth. This week’s IMD forecasts pointing to the possibility of a below-normal monsoon have begun to test that view, bringing concerns around farm output, food prices, and broader economic strain back into focus.
But the relationship is no longer as reliable as it once was.
There was a time when this link was more direct. In years like the 1987 and 2002 droughts, weak monsoons fed quickly into slower growth. Agriculture accounted for a larger share of the economy, and rainfall shocks moved directly through incomes, consumption, and output.
But the structure of the economy has been changing. Agriculture’s share in GDP has declined, while services and industry now account for larger portions. Irrigation coverage has expanded, buffer stocks have improved, and policy responses—from procurement to welfare transfers—have become more active.
As a result, the same shock now moves differently. This shift is visible in more recent episodes. During the 2015-16 El Nino, overall growth remained relatively resilient despite a weak monsoon.
A weaker monsoon today tends to appear less in headline growth and more in inflation and distribution. Lower rainfall can still disrupt crop yields, particularly in rain-fed regions, feeding into food prices, often the most immediate channel through which monsoon variability affects households. Rural incomes can come under pressure and demand in certain categories may soften.
But these effects are partial. They no longer move the entire system in the way they once did.
There is also a layer of uncertainty that complicates the initial reaction. A forecast of a weaker monsoon does not automatically translate into a poor agricultural outcome. Rainfall distribution, intra-season timing, and regional variation all matter. What matters is not just how much it rains, but when and where.
The broader concern—that a weaker monsoon could compound external pressures—reflects a reasonable instinct to connect risks. But the transmission is not linear. Geopolitical tensions affect energy prices and financial conditions. Monsoon variability affects food supply and rural demand. These channels intersect, but they do not reinforce each other mechanically.
What remains unclear is how these pressures, if they persist, will interact over time. Neither, on its own, determines the trajectory of growth. But, together, they shape how expectations may need to adjust.
For now, the reaction is less about what has already happened and more about what could happen. That distinction matters because the monsoon is no longer just a driver of outcomes. It is a factor in how those outcomes are distributed — across regions, sectors, and households.
The task for markets is not to predict the season, but to keep reassessing how these risks are being priced. That process is still underway.
Strain Beneath Growth
Economic growth often shows up first in output and investment. Adjustments in wages and living costs tend to follow more unevenly. The recent protests across parts of northern India suggest that this gap is beginning to surface more visibly.
Earlier this week, parts of Noida—a key manufacturing hub—saw an unusual disruption. Thousands of factory workers blocked roads, bringing activity to a halt. What began as small, largely peaceful protests in some areas escalated into confrontation, with police using tear gas and detaining hundreds of workers.
The immediate trigger was visible: wages. Most protesters are contract workers employed in small factories, earning between Rs 10,000 and Rs 15,000 a month—levels that have not kept pace with the rise in living costs. In response, the Uttar Pradesh government announced a temporary increase of up to 21% in minimum wages in some districts, including Noida, alongside assurances on enforcement.
But the pattern is not confined to one location. Similar demonstrations have happened across neighbouring states. In Haryana, a recent 35% increase in minimum wages followed earlier unrest.
The underlying imbalance is not new. Minimum wages in India are set at the state level and often revised infrequently. In some cases, revisions have been delayed for years.
For workers, the arithmetic is increasingly tight. Rent, food and basic expenses absorb most of their monthly income. Even small disruptions to work can lead to deductions. Recent increases in cooking gas prices—linked to the global energy disruptions caused by the Middle East conflict–have added to costs.
Government data reflects the scale of this strain. A large majority of India’s workforce earns below Rs 20,000 a month—a level that itself is only a rough benchmark of minimum wages in highest-paying regions.
The protests, then, are not just about wage levels. They reflect the widening gap between income and living costs.
But the adjustment is not one-sided. For many small and medium enterprises, which form the backbone of India’s manufacturing sector, wage increases are not easily absorbed. These businesses often operate on thin margins, with limited flexibility to pass on higher costs or renegotiate existing orders. A rise in labour costs, even if modest in absolute terms, can therefore have disproportionate effects on profitability.
This creates a constraint on both sides. Workers need higher wages to maintain purchasing power, while employers face limits in raising them without affecting viability.
The nature of the recent protests also reflects a shift. Unlike traditional labour movements in India, these protests lack formal unions. They are more fragmented and driven largely by contract workers who have limited institutional representation. This makes them harder to predict and, at times, harder to resolve.
It also complicates enforcement. Labour laws and minimum wage frameworks exist, but compliance varies widely, particularly in informal and semi-formal sectors where oversight is limited and jobs are scarce.
Irregular wage revisions, uneven enforcement, and limited support for smaller enterprises have been recurring features of the system. Addressing these requires balancing worker protection with the operating realities of businesses.
What the events in Noida and elsewhere highlight a gradual build-up of pressure. When incomes do not keep pace with living costs, that gap becomes visible in moments like these. The resolution is unlikely to come from a single intervention. It will depend on how wages are revised, how consistently rules are enforced, and how the costs of compliance are distributed across the system.
Market wrap
The stock market extended gains this week as easing tensions in West Asia helped calm investor sentiment. Following the Iran-US de-escalation, expectations of possible talks between Lebanon and Israel further supported the recovery.
However, the upside remained capped. Brent crude continued to hold above $90 a barrel, limiting the appetite for aggressive risk-taking.
Only 11 stocks in the Nifty 50 ended the week in the red. The auto sector accounted for four of these, including Bajaj Auto, M&M, Maruti Suzuki, and Eicher Motors, while technology names such as Wipro and HCL Tech also declined. Despite announcing a buyback, Wipro lost nearly 4% on Friday as the firm missed its January-March guidance. ONGC ended lower, likely on profit booking as easing tensions in the Persian Gulf weighed on crude prices.
Adani Ports and Adani Enterprises led the gains, rising over 6% each. Metals and financials also participated in the rally.
Other Headlines
- Wipro Q4 misses forecasts as revenue rises 7.7%, net profit falls 1.9% to Rs 3,502 crore
- Wipro announces record share buyback of up to Rs 15,000 crore
- India’s retail inflation rises to 3.4% in March from 3.21% in February
- India’s wholesale inflation quickens to more than three-year high of 3.88% in March
- Urea prices double to $1,000 in Indian Potash Ltd’s tender on Iran war shock
- India’s trade deficit shrinks to nine-month low of $20.67 billion in March on US export surge
- India’s gems and jewellery exports fall 3.3% in FY26 to five-year low of $27.72 billion on US tariffs
- French automaker Renault targets seven models in India by 2030
- Flipkart appoints insider Sharon Pais to head fashion unit Myntra
- TCS to investigate allegations of sexual assault, religious conversion in Nashik office
- Real estate developer RMZ plans $35 billion investment, mulls IPO
- HDFC Bank unit HDB Financial’s Q4 profit rises to Rs 751 crore from Rs 531 crore year ago
- ICICI Lombard Q4 profit rises 7% to Rs 547 crore on health, motor insurance boost
- ICICI Prudential Life Q4 profit jumps 54% to Rs 609 crore as new business growth picks up
That’s all for this week. Until next week, happy investing!
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