New Delhi, February 13, 2025 – The Indian stock market has been witnessing a relentless decline over the past five days, with investors losing more than ₹16 lakh crore. The downturn, which began on February 8, has left the market in a state of turmoil, with most stocks trading in the red. Despite a slight recovery on February 12, the overall sentiment remains bearish, raising concerns among retail and institutional investors alike.
The Sensex, which had touched a high of 85,970 points in September 2024, plummeted to 76,000 on February 12, while the Nifty fell below the 23,000 mark. Although both indices showed some recovery later in the day, the market remains significantly lower compared to its peak in September 2024. Analysts attribute the decline to a combination of global and domestic factors, including foreign investor pullouts, weak corporate earnings, and a slowdown in consumer demand.
Foreign Investors Exit, Domestic Investors Hold Steady
Foreign Institutional Investors (FIIs) have been steadily withdrawing from the Indian market since September 2024, selling stocks worth over ₹2.93 lakh crore. This exodus has been partly offset by Domestic Institutional Investors (DIIs), who have invested around ₹33,000 crore during the same period. However, the net outflow has been substantial, with over $20 billion worth of Indian stocks sold by FIIs in the last six months.
The withdrawal of foreign capital has been linked to a shift in global investment trends, with investors flocking to the US and Chinese markets, which have shown stronger growth prospects. Additionally, the Indian economy's growth narrative has been under scrutiny, with GDP growth slowing to 5.4% in the second quarter of 2024, down from earlier projections.
Mid-Cap and Small-Cap Stocks Hit Hard
The mid-cap and small-cap segments have been the worst affected, with several stocks hitting their lowest levels in a year. The Nifty Midcap 100 index has fallen by 12%, while the Nifty Smallcap 100 index has dropped by 18.2% from its peak. Over 1,000 stocks listed on the Bombay Stock Exchange (BSE) have seen their values decline by at least 30% from their highs, leaving retail investors in a precarious position.
Mutual funds, particularly those focused on mid-cap and small-cap stocks, have also suffered significant losses. Reports indicate that 34 out of 425 equity mutual funds delivered negative returns in 2024, with some funds recording losses of over 20%. This has raised questions about the sustainability of retail investor confidence in the market.
Gold Emerges as a Safe Haven
As the stock market continues to struggle, gold has emerged as a preferred investment option. On February 12, the price of 10 grams of gold crossed ₹85,000, with analysts predicting that it could soon touch ₹1 lakh. The yellow metal has delivered a 27% return over the past year, attracting investors looking for safer avenues amid the market volatility.
Government Measures Fall Short
The government's recent budget announcements, including tax cuts and reduced import duties, have failed to boost market sentiment. While these measures were aimed at stimulating consumer demand and attracting investment, their impact has been limited. Critics argue that the government needs to adopt a more proactive approach to address the underlying issues affecting the economy.
What Lies Ahead?
With the market showing no signs of a sustained recovery, investors are bracing for further volatility. The prolonged downturn has raised concerns about the ability of retail investors to withstand the pressure, especially those who entered the market during its peak in 2023. As the Sensex and Nifty continue to hover well below their highs, the focus now shifts to whether the government and regulators can restore confidence and stability to the market.
For now, the mood remains cautious, with investors closely monitoring global developments and domestic economic indicators for any signs of a turnaround.
