India’s stock market, often considered a resilient player in the global financial arena, has been grappling with a prolonged downturn. For six consecutive sessions, the market has ended in the red, marking one of its longest losing streaks this year. The benchmark indices, Sensex and Nifty, have shed significant value, with the former losing over 2,400 points and the latter dropping nearly 700 points since February 4. This decline, amounting to a 3% fall for both indices, has left investors concerned about the underlying causes and the road ahead.
Global Tensions Weigh Heavy
One of the primary drivers of this downturn is the mounting global market tension, largely fueled by policy decisions from the United States. Historically, India’s stock market has shown resilience to global volatility, but the current scenario appears to be an exception.
1. Trump’s Tariff Wars:
US President Donald Trump’s imposition of international tariffs has sent shockwaves across global markets. His initial tariffs on Canada, Mexico, and China, though partially rolled back for Canada and Mexico, have created uncertainty. The ongoing trade tensions with China, in particular, have rattled investor confidence, as they threaten to disrupt global supply chains and trade flows.
2. US Tariffs on Aluminium and Steel:
The US has also imposed tariffs on all aluminium and steel imports, aiming to bolster domestic industries. While this move may benefit US manufacturers, it has sparked fears of a global trade war, leading to widespread market volatility. India, being part of the global trade ecosystem, has not been immune to these developments.
Domestic and External Pressures
While global factors have played a significant role, domestic issues and external economic indicators have also contributed to the market’s decline.
1. Foreign Institutional Investors (FIIs) on a Selling Spree:
FIIs have been offloading Indian equities at an alarming rate. On February 11 alone, they sold equities worth ₹4,486.41 crore, according to exchange data. This sell-off has exacerbated the market’s downward trend, as FIIs are major players in India’s stock market.
2. Disappointing Q3 Earnings:
The third-quarter (October-December 2024) earnings season has failed to deliver the boost investors were hoping for. Many companies have reported lackluster performances or provided cautious growth forecasts, dampening market sentiment.
3. Excessive Stock Valuations:
The Indian stock market had witnessed a stellar rally over the past year, leading to concerns about overvaluation. Analysts had long warned that a correction was imminent, and the current downturn may be a reflection of this adjustment.
Key Losers and Gainers
The six-day losing streak has not spared even the blue-chip stocks. Among the Sensex constituents, Mahindra and Mahindra, ITC, Power Grid Corporation of India, Reliance Industries, IndusInd Bank, Adani Ports, Titan, and Infosys were the biggest losers. On the other hand, Bajaj Finserv, Tata Steel, Larsen & Toubro, UltraTech Cement, Kotak Mahindra Bank, and Tata Motors managed to buck the trend, emerging as gainers.
Investor Anxiety Over US CPI Data
Adding to the uncertainty is the impending release of the US Consumer Price Index (CPI) data, which measures retail inflation. Investors globally are wary of this data, as it often signals shifts in global commodity prices and influences central bank policies. Any unexpected spike in inflation could lead to tighter monetary policies, further unsettling markets.
What Lies Ahead?
While the current downturn is concerning, it is essential to view it in the context of broader market cycles. Corrections are a natural part of market dynamics, especially after a prolonged rally. However, the interplay of global and domestic factors makes the situation particularly complex.
For India, the key to recovery lies in addressing domestic challenges, such as reviving corporate earnings and attracting FIIs back into the market. Additionally, the government’s ability to navigate global trade tensions and maintain economic stability will be crucial.
Conclusion
India’s stock market is navigating a perfect storm of global trade tensions, FII sell-offs, and domestic earnings disappointments. While the six-day losing streak has rattled investors, it also presents an opportunity for those with a long-term perspective to enter the market at attractive valuations. As always, caution and a focus on fundamentals will be essential in these turbulent times.
The road ahead may be bumpy, but India’s strong economic fundamentals and growth potential offer hope for a rebound. For now, investors will be closely watching global developments and domestic policy responses to gauge the market’s next move.