The Indian stock market has been on a downward spiral, with benchmark indices facing sharp declines over the past five months. The Nifty 50 has corrected by nearly 16%, while the Sensex has dropped 15% from its record highs in September 2024. The pain is even deeper in the broader markets, with mid-cap and small-cap stocks experiencing steeper losses.
Sharp Market Decline Continues
The latest weekly performance underscores the ongoing weakness:
- Nifty 50 fell by 2.94%
- Mid-cap Index dropped by 4.4%
- Small-cap Index plunged 6%
Sectorally, all indices ended in the red. IT and Media stocks were hit the hardest, dropping 8% and 7%, respectively, while Realty, PSU Banks, and Energy stocks each declined over 5%.
Foreign investors continue to exit Indian equities at an alarming pace. In the past week alone, FIIs sold ₹22,011 crore, taking the total outflow for February to ₹58,988 crore and for 2025 so far to a massive ₹1.46 lakh crore.
Global Markets Reflect Weakness
The sell-off in Indian markets aligns with a broader global trend. U.S. stocks have faced two consecutive weeks of losses, with the Nasdaq posting its worst weekly close since September. The downturn was largely driven by an 8.48% slump in NVIDIA, which dragged down the high-growth tech sector.
Key Global Trends:
- The Dow Jones managed a small gain, while the S&P 500 remained flat.
- European markets were mixed, with DAX (+1.18%) and FTSE (+1.74%) rising, while France’s CAC 40 fell by 0.53%.
- In Asia, Japan’s Nikkei 225 plunged 4.18%, hurt by weakness in AI and chip stocks.
- Chinese markets fell after Donald Trump reaffirmed plans to impose fresh tariffs on China by March 4.
Are We Near a Market Bottom?
Despite the relentless selling, there are growing signs that the market may be forming a medium-term bottom. The Nifty 50 is approaching a crucial support level around 21,800, which could provide a base for recovery.
Key Indicators Suggest a Bottom Could be Near:
- Oversold Conditions: Many technical indicators are flashing extreme pessimism, similar to past market bottoms.
- FII Short Positioning at Record Levels: Historically, extreme short positions by FIIs have preceded sharp market reversals.
- 40-Day Advance/Decline Ratio Near Historic Lows: The last time this indicator was this low, the market bottomed and started a fresh rally.
- Seasonal Trends: Historically, major bottoms in the Indian market have occurred in March.
For a sustained recovery, the Nifty must break and hold above 22,550. Until then, any rally may face selling pressure.
Sector Rotation – Where to Look Now?
Amid the market turmoil, some sectors are starting to show resilience.
Strong Sectors:
- Nifty Private Bank: The only sector in the leading quadrant, showing strong relative strength and momentum.
- Nifty Financial Services & Nifty Metal: Holding ground and could lead if markets stabilize.
- Nifty Oil & Gas: Moving into the leading quadrant and gaining strength.
Weak Sectors:
- IT, Media, Pharma, and Realty stocks remain underperformers.
- Consumer Durables and Infrastructure are slipping further into the lagging quadrant.
Stocks to Watch
Potential Gainers:
- Kotak Bank, UPL, SBI Card, Bajaj Finance, and Abbott India – showing resilience and could benefit from a recovery.
Likely Weakness Ahead:
- Titan, Hindustan Unilever, Dabur, IIFL, ONGC, and Havells – facing pressure amid weak demand and rising costs.
Investor Strategy: Exit or Accumulate?
Given the sharp correction, investors are wondering whether it’s time to exit or buy the dip.
Expert Views:
- Stay Invested: “Markets deliver asymmetric returns. The biggest gains often come in short bursts, and missing them can be costly.” – Vivek Sharma, Estee Advisors
- Follow a Disciplined Approach: “Investors should use the 40-30-30 strategy – deploy 40% in corrections, 30% if markets drop further, and the remaining 30% when signs of recovery emerge.” – Gaurav Goel, Fynocrat Technologies
- SIP is the Best Approach: “Uncertainty is high, but staying invested through SIP helps navigate market cycles without trying to time the bottom.” – Mohit Khanna, Purnartha Investment Advisors
Invest with Caution
The Indian stock market is firmly in bear territory, but past trends suggest that extreme pessimism often precedes major bottoms. Investors with a long-term view should focus on quality stocks and avoid panic selling. If history is any guide, March could be a crucial turning point.
Stay tuned for more updates as we track the market’s next moves.
