Sensex gives zero returns in 2 years: Should you hold?
What's the story
India's equity markets have been lackluster over the last two years, with the benchmark Sensex now hovering near a two-year low. The index has delivered zero returns during this period. The downturn was especially evident in FY26 when both headline indices ended the year in red due to global shocks and domestic challenges.
Market analysis
Nifty down over 5% in FY26
In FY26, the Nifty index fell over 5%, while the Sensex dropped 7% to nearly 72,000. The latter had reached a high of nearly 85,000 twice over the last two years. However, markets remained under sustained pressure through much of calendar year 2025 due to tariff-related uncertainties, persistent foreign outflows, weak corporate earnings growth, elevated valuations and a weakening rupee.
Global influences
Geopolitical tensions and global liquidity conditions
The situation worsened toward the end of the financial year as geopolitical tensions in West Asia intensified due to the Iran-Israel-US conflict. The flare-up led to a sharp spike in crude oil prices, further complicating India's macro outlook by raising inflation concerns and squeezing corporate margins. At the same time, expectations of US Federal Reserve rate cuts were significantly pared back, tightening global liquidity conditions and adding to equity market stress.
Investor impact
FIIs withdraw ₹1.8 lakh crore in FY26
Foreign institutional investors (FIIs) were key players in the market downturn. Over FY26, FIIs withdrew ₹1.8 lakh crore from Indian equities, with a sharp increase in selling seen in the last quarter. In the three months ending March 2026 alone, outflows stood at ₹1.31 lakh crore. This mass exodus contributed heavily to Sensex's current position near its two-year low and zero returns during this period.
Sectoral analysis
Key sectors that suffered the most
The market downturn saw steep declines across several key sectors. The Nifty IT Index fell 21% on fears of a global slowdown, while new-age and digital businesses tracked by the Nifty India Internet Index plunged 19%. Realty and tourism were among the worst hit, both plummeting 23% as higher interest rates and demand concerns weighed on sentiment.
Market pressures
Financials fail to provide support
Consumption-linked sectors also came under pressure with FMCG down 15% and media falling 14%. Financials, typically market leaders, failed to provide support. The Nifty Financial Services Index declined 6% while the Nifty Bank Index slipped 2%. This paints a picture of a market that has seen time-based correction rather than sharp crashes alone, leading to negligible returns over a two-year horizon despite intermittent volatility.
Future prospects
FY27 outlook remains cautious for equities
Looking ahead, the outlook for FY27 remains cautious. According to Brickwork Ratings, it is likely to be a year of selective opportunities rather than broad-based rallies. Commodities could outperform due to infrastructure demand and geopolitical risk premiums while equities may continue facing headwinds from global uncertainty and earnings pressures. Debt markets are expected to offer relatively more stability in this challenging environment.