The Nifty 50 closed at 22,929.25 on February 14, 13% below its record high. Experts anticipate that Trump's tariff policy and other factors will continue to put pressure on the market, perhaps impeding recovery and extending market consolidation.
Many experts projected that the Nifty 50 could hit the 28,000 level in a few of months last September, when the Indian stock market was booming. They have been rudely shocked, nevertheless.The Nifty 50 is currently down almost 13% from its September 27 record high of 26,277. On a monthly basis, the index has been declining since October. The index finished Friday, February 14 at 22,929.25, down 0.44 percent, prolonging its losing run to the eighth straight day.
The market has entered oversold territory, so a rebound is anticipated, but a new bull phase is not likely to start very soon. The road ahead appears to be difficult, in reality.
More suffering to come?
Despite the possibility of sporadic relief rallies, analysts predict that the Indian stock market will continue to be under pressure in the near future.
"The rupee's depreciation and the slowing pace of economic growth could be the main causes of the current market correction. Nonetheless, Shankar Sharma, a seasoned investor and the creator of the AI software startup GQuant, stated that India is still one of the top countries for bottom-up chances.
According to YES Securities Executive Director Amar Ambani, the Nifty will either stabilize at its current levels or undergo another 3–4% fall. But it's improbable that there will be a structural increase.
More suffering to come?
Despite the possibility of sporadic relief rallies, analysts predict that the Indian stock market will continue to be under pressure in the near future.
"The rupee's depreciation and the slowing pace of economic growth could be the main causes of the current market correction. Nonetheless, Shankar Sharma, a seasoned investor and the creator of the AI software startup GQuant, stated that India is still one of the top countries for bottom-up chances.
According to YES Securities Executive Director Amar Ambani, the Nifty will either stabilize at its current levels or undergo another 3–4% fall. But it's improbable that there will be a structural increase.
"For the next three months, we expect the Indian stock market to stay range-bound and erratic before stabilizing. However, this is really a little pause rather than the end of the bull market, according to YES Securities Executive Director Amar Ambani.
The following five elements are highlighted by a number of experts as potential influences on market sentiment:
1. Uncertainty over the Trump Tariff
With his tariff policies, US President Donald Trump has shocked international markets. He has declared reciprocal tariffs, which has dealt a new blow to market sentiment. This implies that if exporting nations impose high tariffs on comparable items, the US will impose duties on goods at the same level as those countries. His reciprocal tariffs, according to experts, could pose serious challenges for multinational corporations and perhaps spark a broad trade war with both allies and enemies.
It is anticipated that Trump's tariff proposals will keep markets in a slump and investors on edge.
"For a while, the market may continue to consolidate. Until we have clarity, the market will remain under pressure due to the tariff conflict," stated Pankaj Pandey, head of research at ICICI Securities.
The following five elements are highlighted by a number of experts as potential influences on market sentiment:
1. Uncertainty over the Trump Tariff
With his tariff policies, US President Donald Trump has shocked international markets. He has declared reciprocal tariffs, which has dealt a new blow to market sentiment. This implies that if exporting nations impose high tariffs on comparable items, the US will impose duties on goods at the same level as those countries. His reciprocal tariffs, according to experts, could pose serious challenges for multinational corporations and perhaps spark a broad trade war with both allies and enemies.
It is anticipated that Trump's tariff proposals will keep markets in a slump and investors on edge.
"For a while, the market may continue to consolidate. Until we have clarity, the market will remain under pressure due to the tariff conflict," stated Pankaj Pandey, head of research at ICICI Securities.
2. Jitters in the macroeconomic
The prognosis for the Indian economy has been hampered by unpredictability in the monsoon and global uncertainties. Although the nation's economy is predicted to continue to develop at one of the quickest rates, indications of fragility are starting to show.
India's economy is predicted to grow 6.4% in the current fiscal year due to a weaker manufacturing sector and slower corporate investments.
The Reserve Bank of India (RBI) moderately lowered the country's growth projections for the upcoming year during its policy meeting in February. The RBI projects that India's real GDP growth will be 6.7% in 2025–2026, with Q1 at 6.7% (down from 6.9% previously expected), Q2 at 7% (down from 7.3% previously projected), and Q3 and Q4 at 6.5%.
"Whilst long-term macroeconomic fundamentals remain strong, with fiscal consolidation, inflation somewhat benign, bank balance sheets strong, and corporate leverage low, there is clearly a cyclical slowdown driven by slowing public capex and slightly levered households, resulting in slowing consumption, especially middle-class consumption," said Pramod Gubbi, co-founder of Marcellus Investment Manager
3. As US Fed rate drop hopes fade, the FII selloff persists.
Since October of last year, foreign institutional investors (FIIs) have sold off Indian stocks valued at ₹2.94 lakh crore due to rising US bond yields, a strengthening dollar, and the Indian market's stretched valuation.
Foreign capital flight has also been exacerbated by waning expectations of a large rate drop by the US Federal Reserve this year. The Indian stock market might continue to be under pressure if the FPI drain persists.
"FIIs have been lowering their exposure to emerging economies like India as a result of the US tightening its position on import taxes under Trump's policies. Furthermore, FIIs discovered safer returns in US bonds as US government yields gradually increased, which caused outflows. Since the weakening rupee would reduce the value of their portfolio, the rising US dollar has put additional pressure on FIIs' holdings in India, according to Ambani of YES Securities.
"The government has been spending less on capital expenditures than planned, and urban consumption has begun to slow down. Earnings moderation has resulted from this, starting in Q2 and continuing into Q3. The slowdown made Indian markets appear even less appealing to foreign investors (FPIs), as their valuations were already high," Ambani continued.
4. Retail investors' responses to market turbulence
The returns of SMID (small and mid-cap) indexes have outperformed those of retail investors, according to a recent analysis by Kotak Institutional Equities (Kotak Securities).
It would be fascinating to observe how retail investors respond to the success of their investments in the upcoming months, given their aggressive direct and indirect mutual fund investments in these categories.
One of the main things keeping the Indian market from plunging into gloomy territory has been the support of domestic investors. On the other hand, if they panic and start selling, the stock market may experience a significant decline.
5. The fragility of Rupee
Due to its role in the outflow of foreign money, the domestic currency's depreciation continues to be a major worry for investors.
Avinash Gorakshkar of Profitmart Securities claims that one of the main reasons domestic institutional investors, or DIIs, are waiting for stability in the national currency is the ongoing decline of the Indian rupee relative to the US dollar.
Since weak rupees are predicted to trigger FIIs' additional selling as they transition from equity to currency and bond markets, "they are doing this because DIIs don't want a fresh position in their portfolio," Gorakshkar explained.
The prognosis for the Indian economy has been hampered by unpredictability in the monsoon and global uncertainties. Although the nation's economy is predicted to continue to develop at one of the quickest rates, indications of fragility are starting to show.
India's economy is predicted to grow 6.4% in the current fiscal year due to a weaker manufacturing sector and slower corporate investments.
The Reserve Bank of India (RBI) moderately lowered the country's growth projections for the upcoming year during its policy meeting in February. The RBI projects that India's real GDP growth will be 6.7% in 2025–2026, with Q1 at 6.7% (down from 6.9% previously expected), Q2 at 7% (down from 7.3% previously projected), and Q3 and Q4 at 6.5%.
"Whilst long-term macroeconomic fundamentals remain strong, with fiscal consolidation, inflation somewhat benign, bank balance sheets strong, and corporate leverage low, there is clearly a cyclical slowdown driven by slowing public capex and slightly levered households, resulting in slowing consumption, especially middle-class consumption," said Pramod Gubbi, co-founder of Marcellus Investment Manager
3. As US Fed rate drop hopes fade, the FII selloff persists.
Since October of last year, foreign institutional investors (FIIs) have sold off Indian stocks valued at ₹2.94 lakh crore due to rising US bond yields, a strengthening dollar, and the Indian market's stretched valuation.
Foreign capital flight has also been exacerbated by waning expectations of a large rate drop by the US Federal Reserve this year. The Indian stock market might continue to be under pressure if the FPI drain persists.
"FIIs have been lowering their exposure to emerging economies like India as a result of the US tightening its position on import taxes under Trump's policies. Furthermore, FIIs discovered safer returns in US bonds as US government yields gradually increased, which caused outflows. Since the weakening rupee would reduce the value of their portfolio, the rising US dollar has put additional pressure on FIIs' holdings in India, according to Ambani of YES Securities.
"The government has been spending less on capital expenditures than planned, and urban consumption has begun to slow down. Earnings moderation has resulted from this, starting in Q2 and continuing into Q3. The slowdown made Indian markets appear even less appealing to foreign investors (FPIs), as their valuations were already high," Ambani continued.
4. Retail investors' responses to market turbulence
The returns of SMID (small and mid-cap) indexes have outperformed those of retail investors, according to a recent analysis by Kotak Institutional Equities (Kotak Securities).
It would be fascinating to observe how retail investors respond to the success of their investments in the upcoming months, given their aggressive direct and indirect mutual fund investments in these categories.
One of the main things keeping the Indian market from plunging into gloomy territory has been the support of domestic investors. On the other hand, if they panic and start selling, the stock market may experience a significant decline.
5. The fragility of Rupee
Due to its role in the outflow of foreign money, the domestic currency's depreciation continues to be a major worry for investors.
Avinash Gorakshkar of Profitmart Securities claims that one of the main reasons domestic institutional investors, or DIIs, are waiting for stability in the national currency is the ongoing decline of the Indian rupee relative to the US dollar.
Since weak rupees are predicted to trigger FIIs' additional selling as they transition from equity to currency and bond markets, "they are doing this because DIIs don't want a fresh position in their portfolio," Gorakshkar explained.
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