Markets fall 11%: Axis MF’s strategy for investing in uncertain times

If your portfolio has taken a hit recently, you’re not alone.

 

A sharp spike in crude oil prices—triggered by geopolitical tensions in West Asia—has rattled global markets, dragging Indian equities down over 11% in a single month. The sell-off has been broad, hitting large caps, midcaps, and small caps alike, while sectors like banking, real estate, and auto have seen the steepest corrections.

 

“Against this backdrop, sustained foreign portfolio investor (FPI) outflows and currency weakness added to market stress, resulting in elevated volatility across domestic equities. The BSE Sensex and Nifty 50 declined 11.5% and 11.3%, respectively, during the month, with several trading sessions marked by sharp intraday swings—reflecting fragile investor sentiment and heightened uncertainty,” said Axis MF in a report. 

 
 

The sell-off was broad-based across market segments. 

 

Mid- and small-cap stocks also corrected meaningfully, with the NSE Midcap 100 and NSE Smallcap 100 indices declining by 10.9% and 10.2% respectively.

 

 All sectoral indices ended the month in negative territory. Defensive and energy-linked sectors displayed limited relative resilience, while financials and consumer cyclicals bore the brunt of the risk-off environment.

 

But here’s the key question: Should you be worried—or should you be preparing?

 

What’s really happening (and why it matters to you)

 

At the heart of the volatility is oil.

 

India imports nearly 80% of its crude, so when prices jump sharply, it creates a ripple effect:

 

• 
  Inflation risks rise
• 
  The rupee weakens
• 
  Interest rate cuts get delayed
• 
  Corporate margins get squeezed

 

Add to that heavy foreign investor selling (₹100,000+ crore equivalent outflows), and markets become fragile.

 

But there’s a flip side: domestic investors are stepping in strongly, cushioning the fall—an important structural shift in India’s markets.

 

“On the flows front, persistent FPI selling remained a key headwind, though it was partially offset by strong domestic institutional participation, highlighting the growing role of domestic capital in cushioning market drawdowns. FPIs were net sellers of equities worth $12.7 billion during the month, while Domestic Institutional Investors (DIIs) invested $15.4 billion.

 

So what should you do as an investor?

1. Don’t react emotionally—this is a reset, not a collapse

 

Axis Mutual Fund’s view is clear: this looks more like a valuation correction + sentiment reset, not a structural breakdown.

 

Historically, Indian markets recover once:

 

Oil stabilises

Geopolitical uncertainty eases

 

 Translation: Panic selling now could mean missing the recovery later.

 

2. Be selective—not aggressive

 

This is not a “buy everything” dip.

 

Valuations have corrected, but not uniformly:

 

Some sectors now offer attractive entry points

Others are still expensive despite the fall

 

Focus on:

 

• 
  Strong balance sheets
• 
  Companies with pricing power
• 
  Businesses with consistent earnings

 

3. Understand sector winners vs losers

 

This phase is not equal for all sectors:

 

More resilient / potential beneficiaries:

Energy (especially upstream companies)

Defensive sectors

 

Under pressure:

 

• 
  Aviation, logistics (fuel costs)
• 
  Autos, pharma (input cost inflation)
• 
  Financials (sentiment-driven correction)

 

“From a sectoral and company-level perspective, the impact of the conflict is uneven. Energy remains the most directly affected sector: upstream producers benefit from higher realizations, while downstream PSU oil marketing companies face margin pressure due to limited pricing flexibility. Fuel-intensive sectors such as aviation, logistics, and transportation experience immediate cost pressures,” said the report. 

 

 Autos, pharmaceuticals, and industrials face indirect headwinds through higher input costs and softer demand sentiment. Consumer companies are impacted primarily through inflationary pressures rather than direct exposure. 

 

Financials and IT services have corrected largely due to macro uncertainty, capital flow concerns, and global risk aversion, rather than balance sheet stress or structural demand impairment.

 

Strategy: Shift from broad exposure to smart allocation.

 

4. Use volatility to build positions gradually

 

Instead of lump-sum investing:

 

Stagger investments (SIP or phased buying)

Use dips to accumulate quality stocks

 

Markets may remain volatile if oil stays high—so patience matters.

 

“Valuations have adjusted meaningfully over the month, improving the risk-reward balance across several parts of the market. The sharp correction has led to derating across large-cap as well as mid- and small-cap stocks, reducing some of the excesses that had built up over the past year. That said, valuations remain mixed. While select cyclical, industrial, and financial names now offer more attractive entry points, large parts of consumption- and investment-led sectors continue to trade at relatively elevated multiples—warranting selectivity rather than aggressive positioning. The current environment is therefore better characterised by valuation dispersion rather than uniformly attractive valuations,” said the report.

 

5. Think long-term—India’s story is still intact

 

Despite the chaos:

 

• 
  India’s GDP outlook has been upgraded to 7.1%
• 
  Domestic flows remain strong
• 
  Structural growth drivers are unchanged

 

The bigger picture hasn’t broken—only the short-term narrative has.

 

“While near-term volatility may persist and outcomes remain headline-dependent, the recent correction has improved long-term return potential in select pockets of the market. A calibrated equity approach—focused on balance sheet strength, pricing power, and earnings durability—remains essential. Rather than reacting to short-term uncertainty, this phase is best navigated through selective positioning and a long-term perspective on Indian equities,” said the report. 

Read Full News