The Indian stock market has entered a prolonged downturn, with the Nifty 50 witnessing its longest losing streak in 29 years. The benchmark indices, Sensex and Nifty 50, have been falling for five consecutive months, losing significant market capitalization.

On March 3, the Sensex closed at 73,085.94, down 12,892 points (15%) from its peak of 85,978.25 recorded on September 27, 2024. The Nifty 50 closed at 22,119.30, down 4,158 points (15.82%) from its all-time high of 26,277.35.

The BSE-listed firms' cumulative market capitalization has fallen from ₹478 lakh crore to ₹384 lakh crore, making investors poorer by nearly ₹94 lakh crore in just over five months.

Five Key Factors Behind the Market Crash

Several domestic and global factors have triggered the steep correction in Indian equities:

1. Global Uncertainty: US Elections, Fed Policy, and Trade Tensions

• US elections: With the US presidential election in November 2025, market sentiment turned cautious post-September. Concerns over Donald Trump's trade policies and potential protectionist measures have raised fears of a renewed trade war.
• Federal Reserve’s stance: The US Fed’s reluctance to cut interest rates has disappointed global investors. Some experts believe that the era of ultra-low interest rates is over, leading to a prolonged period of high borrowing costs.
• Trade tensions and inflation: Rising US inflation concerns have strengthened the dollar, prompting foreign investors to pull funds from emerging markets like India.

2. Indian Economy Losing Momentum

• India's GDP growth has slowed for three consecutive quarters (Q4FY24 to Q2FY25), raising concerns about a broader economic slowdown.
• Q3FY25 GDP growth stood at 6.2%, the slowest since Q4FY23 (except for Q2FY25).
• The government’s capital expenditure slowed in the first half of FY25 due to general elections and key state elections, delaying infrastructure and development spending.
• Rural and urban consumption weakened, impacting demand-driven sectors like FMCG, auto, and retail, leading to cautious market sentiment.

3. Weak Corporate Earnings and No Sign of Recovery

• Q1, Q2, and Q3 FY25 earnings disappointed, falling short of expectations.
• Overstretched stock valuations triggered a correction once weak earnings surfaced.
• Foreign Institutional Investors (FIIs) started heavy selling in October, driving market declines.
• Analysts predict that Q4 earnings in FY25 may remain weak, adding to the bearish sentiment.
• Concerns over declining credit growth in banks suggest that corporate investment is stagnating, further delaying a rebound in earnings.

4. Massive FII Selloff and Fund Outflows

• Foreign Institutional Investors (FIIs) have offloaded ₹3.24 lakh crore since October 2024, exiting Indian equities aggressively.
• October 2024 alone saw ₹1.15 lakh crore in FII outflows, dragging Nifty 50 down over 6% in one month.
• FIIs are reallocating funds to cheaper emerging markets like China, where valuations are more attractive.
• Higher US bond yields and a strong dollar have made Indian stocks less appealing, leading to continued FII selling pressure.

5. Rupee Depreciation Weakens Market Sentiment

• The Indian rupee has hit record lows amid global economic uncertainty.
• The rising US dollar and capital outflows have further weakened the rupee, making Indian equities less attractive to foreign investors.
• A weaker rupee increases the cost of imports, leading to higher inflationary pressures on the economy, further dampening growth prospects.

Market Outlook: Will the Selling Continue?

Market experts believe that the current downturn may not end soon. Vipul Bhowar, Senior Director, Waterfield Advisors, highlighted key risks:

1. Macroeconomic uncertainties persist, delaying market recovery.
2. FII selling pressure is expected to continue, especially if US bond yields remain high.
3. Weak corporate earnings could further dampen investor confidence in Indian markets.

Until global uncertainties ease and India’s economic growth revives, market volatility is likely to persist. Investors should brace for continued corrections unless FII sentiment turns positive again.

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