Nifty Faces Worst Monthly Losing Streak in 28 Years Amid Outflows & Growth Woes

The leading index Nifty50 is witnessing its worst decline since 1996 and worst overall decline in the past five months. This has now caused both indices to drop to their lowest levels in eight months.

The market has been impacted by weak corporate earnings, foreign capital being withdrawn, and overall uncertainty which has caused a dip in recorded highs just four months previously.

The Nifty 50 and Sensex suffered diffused losses of 4% averagely in the first two weeks of February. This has further compounded their losses from the dip on September 27, 2024 to 13.8% and 12.98% respectively.

Nifty last saw such a drastic five month tangential decline in its records was in the period of July to November 1996. Since then, Nifty has had only two five month losing streaks, the rest being four month losing streaks in 1998 and 2001. The longest losing streak between September 1994 to April 1995, for which the record remains continues to be at eight straight months.

In a recent note published by Kotak Instructorial Equities, their analysts described the recent correction as sharp which makes them cautious trusting the stock market for the coming months as it attempts to withdraw from strong returns of previous years. The Kotak note further added, stating there has been correction, despite positive results, there continues to be limited value-buying opportunities.

The decrement in foreign investor interest in entry-level markets, heightened global interest rates and lack of foreign investment all contribute to Kotak Institutional Equities’ pessimistic view. “Most sectors and stocks continue to trade at rich valuations, with overvaluation increasing inversely with market appropriation, capita, quality and risk,” the note specified. Small to medium scale publicly traded companies have unflinchingly remained the richest and are expected to suffer the most from the ongoing economic downfall.

Conversely, Citigroup believes that it is very easy to perform well in India and has therefore shifted its position on Indian Equities from Neutral to Overweight. The company also cites less stringent assumptions and higher opportunity as reasons for the shift. With the market feeling the pinch of global tariff dangers again, Citi acknowledges India’s relative growth potential.

Looked at from the other side, Citigroup believes headwinds facing ASEAN equities, primarily that of low growth expectations and poor EPS per share are reasons enough to consider the region as Underweight.

Shifting our focus slightly, the negative tone that has come from long-term inflation expectations rising sharply accompanied with weaker than anticipated economic progression has lead to the US stock market suffering the worst trading session. Consumer expectations jumped to the highest levels since 1995 which lowers the chance of a Federal Reserve cut anytime soon leading to terrible investor sentiment.

The market volatility was also heightened by the expiration of $2.7 trillion in options associated with public equities and ETFs which typically causes swings in prices. Turbulence was compounded after Covid-19 vaccine manufacturers skyrocketed on the backdrop of new coronavirus study emerging from China, which has again brought the discussion of possible pandemic related issues back in focus.

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