The Nifty has fallen more than 9% since last Diwali, battered by record foreign investor outflows, soaring crude oil prices and geopolitical tensions. With just two months left in 2026, analysts see a chance for a year-end recovery, although persistent global risks could make the road difficult. The index has lost around 12% since the beginning of 2026, putting it on course for one of its weakest calendar-year performances in recent years unless a meaningful recovery takes shape in November and December.
In September alone, the Nifty lost more than 6%, as surging oil prices, a weakening rupee and relentless foreign selling weighed on investor sentiment. The index subsequently extended its losses into October, recording eight consecutive weeks of declines.
The biggest blow came from the conflict in West Asia, which pushed crude oil prices sharply higher and raised concerns about India's inflation, import bill and economic growth. India depends on imports for most of its crude oil requirements. Higher energy prices increase costs for businesses, put pressure on the rupee and make it harder for policymakers to contain inflation.
Foreign investors have also pulled out money at an unprecedented pace. Overseas funds sold Indian equities worth about $31.3 billion in 2026 as higher global bond yields, currency weakness and concerns over oil prices encouraged investors to reduce exposure to emerging markets.
A shift in global investment towards artificial intelligence-related companies in markets such as South Korea and Taiwan has further affected India's appeal to foreign investors.
However, the recent market rebound has offered some relief. On November 2, the Nifty jumped over 388 points, or 1.68%, supported by a sharp rally in Reliance Industries and easing crude oil prices.
Avinash Gorakshakar, founder of Avinash Mentor Research in Mumbai, believes positive returns are possible in November and December, although the market will have to navigate high volatility and several macroeconomic risks.
He identified September-quarter corporate earnings and domestic institutional investment as two important factors that could support a recovery. Strong earnings growth would help justify stock valuations and encourage investors to return to equities. At the same time, steady investments through systematic investment plans and mutual funds could continue to absorb selling pressure from foreign investors.
Domestic institutions have played an important role in cushioning the market's decline this year. Their sustained purchases have helped prevent an even sharper correction despite heavy overseas outflows.
Still, recovering the losses accumulated over the past year will be difficult. For the Nifty to return to its last Diwali level of 25,868.60, it would need to gain about 10.4% from its November 2 closing level. Erasing its calendar-year losses would require an even stronger recovery.
Paresh Bhagat, chairman of Mangal Keshav, said a sustained rebound remains uncertain despite the possibility of positive returns in the remaining two months. "Following a challenging year, with the Nifty down approximately 12% year-to-date, oversold conditions and improving global cues could support a short-term rebound," Bhagat said.
He expects the market's direction to depend largely on crude oil prices, geopolitical developments, foreign institutional flows and corporate earnings.
An improvement in these factors could help the benchmark recover, while persistent headwinds could restrict gains. Bhagat expects continued volatility and sees greater scope for selective gains in fundamentally strong companies than a broad market rally.
Abhinav Tiwari, senior research analyst at Bonanza, also expects a gradual recovery rather than a sharp rebound. "Despite the heightened volatility witnessed throughout 2026, we remain cautiously optimistic on the Nifty's prospects over the next two months," Tiwari said.
He believes improving corporate earnings, festive consumption and attractive valuations in large-cap stocks could provide support in the coming weeks.
The ongoing September-quarter earnings season has shown signs of recovery in several sectors, while expectations of stronger December-quarter results could help improve market confidence.
However, the upcoming US midterm elections could create fresh volatility through changes in policy expectations, bond yields, currency movements and foreign investment flows.
Higher crude oil prices and continued foreign selling remain significant risks. Tiwari expects the Nifty to maintain a positive bias through December, provided corporate earnings improve and global pressures ease.
For investors, November and December will test whether the recent rebound can develop into a sustained recovery. Stronger earnings and domestic investment flows offer some support, while oil prices, foreign selling and geopolitical tensions remain major obstacles.
Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and his ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclosures here.
