The Indian stock market has been experiencing a period of volatility, with the Sensex and Nifty facing a consistent decline over the last six months. Several factors have contributed to this downturn, creating uncertainty among investors.
Key Factors Behind the Decline:
- Global Economic Uncertainty: Escalating uncertainty around U.S. trade policies has weighed down investor sentiment. U.S. President Donald Trump's announcement of tariffs on countries, such as Colombia, and the threat of tariffs on others like Canada and Mexico, have triggered concerns about potential trade wars.
- Foreign Fund Outflows: Continuous foreign fund outflows have added to the negative sentiment, putting downward pressure on the markets. In January 2025, foreign portfolio investors (FPI) selling amounted to ?69,000 crore, impacting the market despite domestic institutional investor (DII) buying of ?67,000 crore.
- Political and Policy Uncertainty: Political events and sudden changes in government policies can significantly impact stock market stability. Unexpected reforms or geopolitical tensions can unsettle investors.
- Tax Policy Changes: The Indian stock market is sensitive to tax-related changes that affect investor returns and corporate profitability. Changes in corporate tax rates or dividend taxation can lead to volatility.
- Company Performance: A company's fiscal well-being and ability to generate profits play a crucial role in stock prices. Announcements regarding product launches, mergers, acquisitions, or shifts in management can also impact a company's stock price. Disappointing earnings from Indian companies in sectors like consumer staples, automobiles, and building materials have contributed to investor concerns.
Recent Market Performance:
- Between February 9 and 14, 2025, the Sensex plunged 2.46%, while the Nifty tumbled 2.67%.
- On February 12, 2025, the Sensex fell 905.21 points to reach a low of 75,388.39, while the Nifty 50 gave up the 23,000 mark, hitting a low of 22,798.35.
- On January 27, 2025, the BSE Sensex tumbled 842.4 points, or 1.1 percent, to hit an intraday low of 75,348.06. The NSE Nifty breached the 22,850 mark, reaching a low of 22,826.85, down 265.35 points, or 1.14 percent.
Several blue-chip stocks have borne the brunt of the recent sell-off. Some of the notable losers include:
- Zomato: The food delivery giant has faced a steep decline. Over the past month, its share price declined by around 9%.
- NTPC: The power sector was not spared, with NTPC's stock losing approximately 10% YTD1.
- Tata Steel, Power Grid, Reliance Industries (RIL), Bajaj Finance, Titan Company, IndusInd Bank, Tata Motors, HDFC Bank, Axis Bank, and Sun Pharma were also among the top Sensex losers.
When Might the Market Rebound?
Predicting market recovery is challenging, but several factors could contribute to a turnaround:
- Easing of Global Tensions: A resolution to the trade disputes and geopolitical tensions could boost investor confidence.
- Strong Economic Data: Positive economic data, such as GDP growth and improved corporate earnings, could signal a recovery.
- Government Policies: Pro-growth government policies and reforms could attract investment and stimulate the market.
- Technical Indicators: A break above 22,970 in the Nifty charts could trigger a steep correction, potentially leading to a recovery. Favoring a buy-on-dips strategy above 22,725 may also indicate a potential rebound.
Indian Economy in FY 2025-26:
The performance of the Indian economy in FY 2025-26 will be crucial in determining the direction of the stock market. Factors to watch include:
- GDP Growth: Strong GDP growth can boost investor sentiment and attract foreign investment.
- Inflation and Interest Rates: Managing inflation and interest rates effectively will be essential for maintaining economic stability.
- Government Spending: Government spending on infrastructure and other key sectors can stimulate economic growth.
Which Sectors are Expected to Boom?
While it is difficult to predict specific sectors that will boom, several sectors have the potential for growth in FY 2025-26:
- Infrastructure: Increased government spending on infrastructure projects could benefit construction and related industries.
- Manufacturing: Government initiatives to promote manufacturing could lead to growth in this sector.
- Technology: The technology sector is expected to continue growing, driven by increasing digitalization and demand for IT services.