Nifty50 on brink of longest losing streak in 28 years
What's the story
India's benchmark index, Nifty50, is on the verge of its longest losing streak in nearly three decades.
If it falls again this February, it will be the first time since 1996 that the index has seen a five-month consecutive fall.
The current market slump is largely due to aggressive selling by foreign institutional investors (FIIs), who have sold stocks worth over ₹2 lakh crore since October 2024 due to a weakening rupee.
Market history
Historical perspective on Nifty50's losing streaks
Since 1990, the Nifty50 has witnessed five or more consecutive monthly declines only twice.
The longest was from September 1994 to April 1995, when the index plummeted by a staggering 31.4% over eight months.
The last such decline was in 1996, with a drop of 26% from July to November.
The current downturn is less severe but still significant, with an overall fall of 11.7% since October last year.
Market forecast
Technical analysis predicts further correction for Nifty50
Having already witnessed a 3% drop this month, the index may witness a short-term correction toward 22,500-22,400, predict technical analysts.
They say the index will remain a sell-on-rise as long as it stays below 22,850.
Rupak De, Senior Technical Analyst at LKP Securities, explained "since the end of September last year, the index has been falling, forming a lower top-lower bottom pattern on the daily chart."
International impact
Global factors influencing India's equity market
The fall in Indian equities is being compounded by a robust recovery in Chinese markets, prompting a tactical shift in FII flows.
Since October 2024, India's market cap has shrunk by $1 trillion while China's has jumped by $2 trillion. The Hang Seng Index has jumped 18.7% in just a month.
BofA Securities observed that allocations to China rebounded after a sharp fall last month while support for Indian equities continues to wane with allocations collapsing to a two-year low.
Market trends
Analysts suggest continued trend of favoring Chinese stocks
Analysts expect the "Sell India, Buy China" trend to continue as Chinese stocks stay attractively priced.
Vaibhav Porwal, co-founder of Dezerv, credits China's September 2024 economic stimulus package including policy support, regulatory easing measures to boost FII sentiment.
Despite India's market downturn, SBI Securities recommends a bottom-up stock-picking strategy and investing in quality stocks in a staggered manner.
They advise against micro-cap stocks with an annual profit pool below ₹100 crore as pain in this segment is likely to persist.