The Indian stock market witnessed a bloodbath on Friday, February 28, 2025, as benchmark indices nosedived amid a perfect storm of global trade tensions, weak economic data, and relentless foreign investor outflows. The Sensex plummeted by 1,414 points, or 1.9%, to close at 73,198.10, while the Nifty 50 tumbled 420 points, or 1.86%, to end the day at 22,124.70. This marked the sixth consecutive week of losses for the indices, their longest losing streak in nearly three decades.
A Market in Freefall: Key Highlights
- Sensex and Nifty: Both indices recorded their worst weekly performance of 2025, with the Nifty shedding nearly 3% over the week. The Sensex is now down 16% from its September 2024 peak, while the Nifty has lost 18.5% during the same period.
- MidCap and SmallCap Carnage: The BSE MidCap and SmallCap indices were hit even harder, losing 2.16% and 2.33%, respectively. Over 700 stocks hit their 52-week lows, reflecting the widespread panic among investors.
- Sectoral Meltdown: All sectoral indices ended in the red, with Nifty IT and Nifty Auto leading the losses. The IT index crashed 4.18%, while the Auto index fell 3.92%. Other major losers included Nifty Media (-3.5%), Nifty PSU Bank (-2.8%), and Nifty Healthcare (-2.2%).
- FPI Exodus: Foreign Portfolio Investors (FPIs) continued their selling spree, offloading Indian equities worth Rs 46,000 crore in February alone. Since October 2024, FPIs have pulled out a staggering Rs 2.13 lakh crore from the Indian markets.
What Triggered the Sell-Off?
The market rout was driven by a combination of domestic and global factors, creating a perfect storm for investors.
1. Global Trade War Fears
The announcement of new tariffs by US President Donald Trump sent shockwaves across global markets. Trump revealed plans to impose a 25% tariff on imports from Canada and Mexico, effective March 4, and an additional 10% levy on Chinese goods. This escalation in trade tensions raised fears of a full-blown trade war, dampening investor sentiment worldwide.
Asian markets bore the brunt of the sell-off, with Japan’s Nikkei falling 3%, South Korea’s Kospi dropping 3.39%, and Hong Kong’s Hang Seng declining 3.28%. The ripple effect was felt in India, where export-heavy sectors like IT and Auto were hit the hardest.
2. Weak Global Economic Data
The release of disappointing economic data from the US added to the gloom. The US GDP growth for Q4 2024 came in at 2.3%, indicating a slowdown in consumption. Analysts warned that Trump’s tariffs could further stifle consumer spending by driving up prices.
3. Domestic Concerns
On the domestic front, investors remained cautious ahead of the release of India’s Q3 GDP data, scheduled for later in the day. Concerns over slowing economic growth, coupled with underwhelming corporate earnings, weighed heavily on market sentiment.
4. FII Outflows and Valuation Worries
Persistent selling by foreign institutional investors (FIIs) has been a major drag on the markets. Since October 2024, FIIs have pulled out over Rs 2.13 lakh crore from Indian equities. Additionally, valuations in the mid- and small-cap segments remain a concern, with many stocks still trading at elevated levels despite the recent correction.
Sectoral Deep Dive
IT Sector: The Biggest Loser
The Nifty IT index was the worst-performing sector, plunging 4.18%. Heavyweights like Tech Mahindra, Wipro, and Infosys led the decline, shedding 5-6% each. The sector’s woes were compounded by weak global cues and concerns over slowing demand from key markets like the US and Europe.
Auto Sector: Hit by Double Whammy
The Nifty Auto index fell 3.92%, dragged down by fears of weak February sales data and rising input costs. Maruti Suzuki, M&M, and Tata Motors were among the top losers, declining 4-5% each.
Banking Sector: Mixed Bag
The Nifty Bank index slipped 0.82%, with private banks like HDFC Bank and Axis Bank providing some support. However, public sector banks faced heavy selling pressure, with the Nifty PSU Bank index falling 2.8%.
Expert Views: What Lies Ahead?
Market experts remain cautious but see a glimmer of hope for a potential rebound.
Amol Athawale, VP-Technical Research, Kotak Securities
“Technically, the Nifty has formed a bearish candle on weekly charts and is holding a lower top formation on daily charts, which is largely negative. However, the market is oversold, and a pullback rally from current levels cannot be ruled out. For short-term traders, 22,200 is a key level to watch. A sustained move above this level could trigger a quick rebound to 22,300-22,500.”
Rupak De, Senior Technical Analyst, LKP Securities
“The Nifty has entered the oversold zone, and we expect support around 21,800-22,000. A recovery from these levels could lead to a significant bounce, but failure to hold this support may result in another sharp decline.”
Vinod Nair, Head of Research, Geojit Financial Services
“The market is grappling with multiple headwinds, including global trade tensions, slowing economic growth, and persistent FII outflows. The upcoming GDP data will be crucial in determining the market’s direction in the near term.”
Retail Investors: Sitting on Heavy Losses
The relentless sell-off has left retail investors nursing heavy losses. Many who entered the market during the 2024 rally are now sitting on significant mark-to-market losses, whether through direct equity investments or mutual funds.
- Mutual Funds: The equity mutual fund sector saw its assets under management (AUM) shrink by Rs 1.1 lakh crore in January 2025, as falling stock prices led to mark-to-market losses. Small-cap and mid-cap funds were the worst hit, with AUMs declining by 7.19% and 6.65%, respectively.
- Insurance Companies: Insurance firms, which are major investors in the equity markets, have also seen their portfolios erode in value.
Conclusion: Is the Worst Over?
The Indian stock market is currently in the grip of a severe bear phase, with no immediate signs of relief. While the market is oversold and a technical rebound is possible, the underlying concerns over global trade tensions, slowing economic growth, and FII outflows are likely to keep sentiment subdued in the near term.
Investors are advised to tread cautiously and focus on quality stocks with strong fundamentals. As the old adage goes, “The market can remain irrational longer than you can remain solvent.” For now, patience and prudence are the need of the hour.
Key Takeaways:
- Sensex and Nifty recorded their worst weekly performance of 2025.
- Nifty IT and Auto were the worst-performing sectors, falling over 4% and 3.9%, respectively.
- FPIs have pulled out Rs 2.13 lakh crore since October 2024.
- Global trade tensions and weak economic data were the primary drivers of the sell-off.
- Experts suggest a potential rebound if Nifty holds the 22,000 level.