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India
The Nifty50 is on the verge of its longest losing streak in 28 years, as foreign institutional investors (FIIs) have sold over ₹2 lakh crore since October 2024. Factors such as a strengthening Chinese market, tariff concerns, and technical weakness have intensified the selloff, which could lead to an unprecedented five-month decline.
Currently, India’s benchmark index is at risk of recording five consecutive months of losses, a pattern last seen in 1996. Such extended downtrends have occurred only twice in the past 34 years. The worst decline happened between September 1994 and April 1995, when the index fell by 31.4% over eight months. A 26% drop over five months occurred in 1996.
The Nifty has already dropped 11.7% since October 2024, with a further 3% decline this February. Analysts predict that unless the index surpasses 22,850, it could slide towards 22,500–22,400.
Rupak De, Senior Technical Analyst at LKP Securities, noted that the index has been forming a lower top-lower bottom pattern since the end of September 2024, signaling a market favoring a sell-on-rise strategy, where sellers are willing to unload at lower prices in a weak market environment.
Foreign investors are also shifting focus to China, adding to the pressure on the Nifty. Since October 2024, India’s market capitalization has dropped by $1 trillion, while China’s has grown by $2 trillion. The Hang Seng Index has risen by 18.7% in a month, contrasting with the Nifty50’s 1.55% decline. This shift is driving FIIs toward Chinese equities, boosted by China’s economic stimulus measures introduced in September 2024.
Vaibhav Porwal, Co-Founder of Dezerv, pointed out that China’s policy support, regulatory easing, and efforts to improve foreign investor sentiment have played a significant role in attracting FIIs to China.
In terms of investor strategy, analysts recommend a bottom-up approach, focusing on quality stocks. Veteran investor Sandip Sabharwal views the selloff as temporary. SBI Securities advises avoiding micro-cap stocks with profits below Rs 100 crore, as these are likely to experience continued difficulties. Tax harvesting strategies are also suggested in the coming weeks.
Motilal Oswal Private Wealth cautions that while the Nifty50’s forward P/E ratio is below its long-term average, mid-cap and small-cap stocks remain overvalued, with 40% of mid-cap and 35% of small-cap stocks trading at a P/E ratio above 50, signaling stretched valuations despite recent corrections.
Looking ahead, FII flows are expected to reverse for most emerging markets, including India, which typically receives 18-20% of FII allocations. This presents a potential opportunity for investors to accumulate stocks based on strong fundamentals and valuations.
If the Nifty50 continues its downward trend into February, it could set a historic record, unseen since 1996. Given ongoing FII rebalancing and global uncertainties, investors may need to prepare for further volatility before a potential recovery.
