From defensives to rate-sensitive, FY26 market rout cut across sectors

If FY26 had a defining feature, it was the breadth of the sell-off. Indian equities didn’t just correct, they saw a deep, cross-sector downturn that dragged the market lower even as global peers surged ahead.From defensive sectors like FMCG to rate-sensitive realty and global-facing IT, few corners of the market were spared, underscoring the unusual breadth of the downturn.

The stress was not confined to isolated sectors but reflected broader macro headwinds—from global uncertainty and tariff tensions to persistent foreign outflows.Real estate stocks were the worst performers with the BSE Realty index falling 23.6% in FY26, its weakest performance since the pandemic. Higher interest rates and tighter liquidity conditions hit housing demand and dampened consumer sentiment, reversing gains from the previous cycle.

Mint analysis shows the sector has declined on 10 occasions over the past two decades, with its steepest fall over 79%, during the FY09 real estate downturn. The pressure was equally pronounced in information technology.

The BSE IT index emerged as the second worst performer, falling 22.7%—its sharpest drop since FY09—as slowing global tech spending and cautious client budgets weighed on growth.The fall was further exacerbated by AI-led disruption, marked by concern over workforce displacement and the rise of startups reshaping traditional service delivery models. Over the past two decades, IT has declined in about 43% of years, with its steepest fall over 49%, recorded during the global financial crisis in FY08.The stress was also visible in sectors typically seen as defensive, such as FMCG.