On A Downward Spiral
R@hul PotuCategories: DSIJ_Magazine_Web, DSIJMagazine_App, Editorial, Market Moves, Market Watch
The market sentiment remained deeply pessimistic over the past fortnight, pushing India’s benchmark Nifty 50 into uncharted territory by logging its fifth consecutive month of decline—a record-breaking slump not seen in 28 years.
The market sentiment remained deeply pessimistic over the past fortnight, pushing India’s benchmark Nifty 50 into uncharted territory by logging its fifth consecutive month of decline—a record-breaking slump not seen in 28 years. The index has now corrected over 15 per cent from its all-time high, reflecting the extent of investor unease. Foreign institutional investors (FIIs) remained net sellers during the fortnight, offloading equities worth around ₹29,800 crore.
Domestic institutional investors (DIIs) attempted to stabilise the falling market by infusing ₹38,800 crore, but their efforts did not yield the desired impact. Most trading sessions during this period ended in substantial losses, with the February 28 session witnessing a particularly sharp decline, mirroring the global market rout. The trigger was weak U.S. consumer confidence data, a critical economic indicator reflecting consumer sentiment on spending, job security, income growth, inflation, and overall economic conditions.
The downbeat reading intensified fears of an economic slowdown, sending shockwaves through global equities, including the Indian markets. As a result, frontline indices BSE Sensex and Nifty 50 recorded losses exceeding 3.5 per cent each over the fortnight. The BSE Mid-Cap index displayed relative resilience, limiting its losses to under 3 per cent, while Small-Cap stocks bore the brunt of intense selling pressure. The BSE small-cap index plunged by over 5 per cent, continuing its steep downturn.
The market correction, which was initially seen as a decent adjustment, is now causing panic, with benchmarks down more than 15 per cent and broader indices plunging around 25 per cent from their record highs. Let’s explore the factors driving this downturn
Experts remain cautious, noting that the BSE small-cap index has now fallen more than 25 per cent from its December 2024 peak, and predicting that a definitive market bottom remains highly challenging. The BSE Information Technology index emerged as the worst performer over the past two weeks, plunging around 10 per cent, driven by a sharp selloff in AI-focused stocks. The downturn was triggered by a steep decline in NVIDIA shares amid concerns over Donald Trump’s tariff threats and rising competition from DeepSeek.
A drop in consumer confidence directly impacts demand, posing challenges for consumer-driven sectors like retail, real estate, and automotive, as companies dependent on discretionary spending may face slower revenue growth and profitability pressures. As a result, weak investor sentiment quickly became evident in the real estate and automotive sectors. The BSE Metal index was the only gainer during the last fortnight, rising by 1.39 per cent, while power and banking sector stocks showed relative outperformance as they had already been heavily beaten down.
In other developments, India’s economic growth gained some momentum in the December quarter, rebounding from the slowdown witnessed in the September quarter. However, with GDP expanding at 6.2 per cent, it remained one of the slowest paces of growth in the last few quarters—except for the preceding quarter (Q2), which witnessed an even lower growth rate of 5.6 per cent. Stay tuned for further updates.
