The Nifty 50 is heading for a five-month losing streak, marking its worst downturn since 1996. Weak corporate earnings, continued foreign investor outflows, and economic uncertainties have pushed Indian markets to their lowest levels in eight months.
So far in February 2025, both Nifty 50 and Sensex have fallen around 4 percent, extending their total losses to 13.8 percent and 12.98 percent, respectively, from their peak on September 27, 2024. The last time Nifty fell for five straight months was between July and November 1996. In the past, similar downturns of four months were seen in 1998 and 2001, while the longest losing streak on record was eight months, from September 1994 to April 1995.
Cautious Market Outlook
After the recent decline, analysts in Kotak Institutional Equities have cautioned that months ahead may be unpredictable while settling in following good returns in recent years. The brokerage noted that while there is a correction, 12-month total returns have remained stagnant, restricting chances for value buying.
Kotak’s report listed several risks, including stock price valuations running high, prospects of deterioration in earnings, rise in global interest rates, and weakening foreign investor confidence in equities in emerging markets. The report also included small- and medium-sized cap stocks to stay under strain on account of their relatively high valuations.
On the other hand, Citigroup upgraded Indian equities to ‘Overweight’ instead of ‘Neutral’ on cheaper valuations and upswing potential. Citigroup believes India is likely to outpace other emerging market equities, in case trade tensions rise around the world. Citigroup, however, downgraded equities in ASEAN to ‘Underweight’ on poor earnings and lackluster economic forecasts.
Global market sentiment has also turned negative, with US stock markets suffering their worst trading session of the year on Friday. A combination of weak economic data and a rise in long-term inflation expectations dampened investor confidence, reducing hopes for an early Federal Reserve interest rate cut.
Additionally, the expiries of equity and ETF options valued at $2.7 trillion elicited increased market volatility. On the other hand, producers of Covid-19 vaccines saw stock price appreciation on news of a coronavirus trial in China, following pandemic-related fears.
With ongoing market uncertainties, investors will have to keep their guard up in the months to come.
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Source: Moneycontrol.
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