Markets have begun to climb the wall of worry

History doesn’t repeat itself perfectly, but in markets, it often rhymes with uncanny precision. From the chaos of the COVID-19 collapse to the present-day geopolitical tremors, one principle continues to stand tall: markets climb the wall of worry.

Cast your mind back to early 2020. The Nifty scaled highs in January, attempted to reclaim momentum in February, but failed to print a new all-time high. What followed was one of the sharpest drawdowns in market history. On 23rd March 2020, the index marked its lowest closing level amid panic, forced liquidations, and a complete breakdown in visibility.

Two days later, on 25th March 2020, India entered a nationwide lockdown. Economic activity came to a grinding halt. There was no clarity on earnings, no roadmap for recovery, and no timeline for normalization. If ever there was a moment for markets to stay depressed, this was it.

However, markets had other plans.

Even before earnings visibility improved or economic indicators stabilized, equities began their ascent. By the time India initiated its first vaccination phase in January 2021, the Nifty was already trading at all-time highs. The message was clear: markets discount the future not the present. They had already priced in the worst of the fall and the hope of recovery, long before it became visible in data.

Earnings Collapse vs Market Resilience

The divergence between fundamentals and price action was stark.

In Q1 FY2020-21, companies reported multi-quarter lows in revenue growth, as reflected in the financial results of 489 companies (excluding financial sector entities). Aggregate revenues contracted by 31.1% YoY, with consumer-facing sectors plunging nearly 49%.Profitability margins compressed significantly due to fixed overheads and negligible revenues.

On paper, it was one of the weakest earnings seasons in decades.

Yet, the market remained largely unfazed.

Why? Because by then, the market had already discounted the collapse. Investors were looking ahead—to reopening, recovery, and normalization. The pain was visible in earnings, but the hope was already embedded in prices.

2020: Crash & Recovery

2026 Volatility: Market Rebounds amid Uncertainty

2026: A Familiar Pattern Emerges

Fast forward to 2026, and the pattern appears eerily similar.

The Nifty once again peaked in January 2026, attempted to reclaim those levels in February, but failed to make a fresh high. Then came the trigger; escalation of the US-Iran conflict starting 28th February 2026. Risk-off sentiment gripped global markets, leading to a sharp correction.

By 30th March 2026, the market marked its lowest close in the current cycle.

Since then, however, the index has staged a meaningful recovery retracing nearly half of its losses. This, despite the fact that there is no conclusive geopolitical resolution, no clear peace agreement, and continued uncertainty around crude prices, inflation, and earnings.

More interestingly, the downside momentum has started to fade. Markets are no longer reacting with the same intensity to negative developments.

The Silent Force: Investor Behaviour

Perhaps the most compelling shift this time lies beneath the surface in investor behavior.

In March 2026, while the Nifty declined by 11.31%, flows into equity mutual funds told a completely different story. Growth and equity-oriented schemes witnessed inflows of ₹40,450 crore a 56% surge month-on-month, marking the highest level in eight months.

This is not just liquidity, it is learning in action.

Investors, shaped by the experiences of 2020, appear to have internalized a critical market truth: periods of maximum fear often coincide with phases of maximum opportunity. Instead of retreating, capital is stepping in.

What Lies Ahead?

It would be premature and perhaps imprudent to conclude that markets are poised for an uninterrupted upside. The current environment remains fragile. Geopolitical risks persist, inflationary pressures are building, and crude disruptions could weigh on corporate earnings.

Markets can very well retest lower levels.

But what recent price action indicates is equally important: the market may have already begun discounting a significant portion of the risk.

Just as in 2020, when earnings collapsed but markets rallied, today’s environment presents a similar dichotomy; weak near-term visibility, but improving forward expectations.

The Core Insight

Markets don’t wait for clarity, they move ahead of it. Across cycles, from the 2020 pandemic crash to the 2026 geopolitical tensions, one pattern remains clear: when uncertainty peaks, markets begin to stabilize before fundamentals improve. Recovery is driven not by the absence of risk, but by its early pricing.

Today, despite elevated risks of war, inflation, and earnings pressure, market reactions are softening, indicating much of the fear may already be discounted. This isn’t a call for immediate upside, as volatility can persist. However, history shows markets lead sentiment.

By the time certainty emerges, prices have adjusted quietly climbing the wall of worry.