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After a nearly five-month correction, the BSE Sensex and the NSE Nifty are set to record their longest monthly losing streak since 1996.
Both Nifty and Sensex are currently at their eight month low levels after nearly five months of continuous decline.
The domestic stock market has been facing a continuous decline since September 2024 amid an FII selloff and weak quarterly earnings. After a nearly five-month correction, the BSE Sensex and the NSE Nifty are set to record their longest monthly losing streak in multiple decades. The last time Nifty saw a continuous decline of five months was between July and November 1996.
The NSE Nifty touched its peak of 26,277.35 on September 27, 2024. From this, it has declined to around 22,550 on February 24, 2025, a correction of 14.18 per cent during the past about five months.
The BSE Sensex was also at its peak at 85,978.25 on September 27, 2024. The index has crashed to below the 75,000 mark to trade at 74,458.32 as on February 24, 2025. It is a 13.39 per cent fall as compared with its peak.
Both Nifty and Sensex are currently at their eight month low levels after nearly five months of continuous decline. According to a Moneycontrol report, this is going to be the longest losing streak in the Indian stock market since 1996.
Why Has Indian Stock Market Fallen So Much In The Past Five Months?
A number of factors have led to a significant decline in the Indian stock market, including continuous FPI outflows in the past over five months, weak quarterly earnings in Q3 and Q4, weak Q2 GDP growth, geopolitical uncertainties, and the recent US market boom.
FPI Outflows: Foreign Portfolio Investors have pulled out a net investment of Rs 16,06,492 crore, including equities, debt and mutual funds, in the current financial year 2024-25 so far (till February 21, 2025). Though mutual funds saw the smallest impact, while the equities saw the biggest.
Weak Quarterly Earnings: Weak quarterly earnings in Q2 triggered the market selloff in the ongoing market correction. The corporate earnings indicated weak urban consumption as reflected in auto and FMCG financial numbers. The numbers were weak across the sectors. Now, the earnings have, however, improved but a significant recovery is yet to be seen.
Q2 GDP Growth: India’s Q2 GDP growth came out as a surprising low of 5.4 per cent, as against the expectations of around 6.5 per cent. Though India still remained the fastest growing economy, the growth rate was the lowest in the seven quarters. The latest Q3 FY25 GDP numbers will be released on February 28, 2025.
Geopolitical Uncertainties: Unfavourable events, like Middle East tensions and escalation of the Russia-Ukraine war, across the world weighed in on the Indian stock market in the past five months. Now, US President Donald Trump’s imposition of tariffs is further denting the market sentiments.
Global Market Boom: Boom in the US market after Trump’s victory has prevented the foreign investors to move from the US to other emerging markets like India. The bond yields in the US touched as high as 4.6 per cent recently, which ensured high returns for investors in their domestic market thus leaving no incentive to invest in other markets.
What’s Next?
After the correction, analysts at Kotak Institutional Equities in a recent note said they are cautious, and expect stocks to remain directionless in coming months as it adjusts to strong returns from recent years.
It added that despite the correction, returns over a 12-month period are flat, thus limiting value-buying opportunities.
Kotak Institutional Equities attributed its cautious outlook to factors such as elevated valuations, risk of earnings downgrades, high global interest rates and declining foreign investor interest in emerging markets. “Most sectors and stocks continue to trade at rich valuations, with overvaluation increasing inversely with market capitalisation, quality, and risk,” the note said.
JM Financial in its note on Monday said, “Our analysis indicates that the Nifty has exhibited a positive price seasonality in the month of March. In the last 10 years, the index has closed in the green on seven occasions with an average return and a median return of -0.3% and 1.3% respectively.”
Ignoring the steep negative return of 23% in the year 2020 (coinciding with the surge of Covid-19 cases), the average return stands at 2.3%, it added.
