March 3, 2025: The Indian stock market has experienced a significant downturn, with nearly Rs 85 trillion in wealth evaporating since September 2024. Despite Friday’s GDP numbers showing a rebound in the last quarter, the NSE Nifty 50 logged its fifth straight monthly loss, marking its longest losing streak since its launch in 1996. This makes India the worst-performing major market globally
Factors affecting the weekly slide are
- Corporate earnings have been underperforming, which is a key driver of stock prices.
- Persistent Foreign Outflows: Foreign investors have been withdrawing capital, further pressuring the market.
- Uncertainty Regarding Tariffs: Concerns over potential tariffs from the United States, particularly from Donald Trump’s threats of reciprocal tariffs, are adding to market volatility.
- Global Economic Slowdown: Fears of a slowdown in the US economy and other global markets are also weighing on investor sentiment.
The Reserve Bank of India (RBI) has taken steps to stimulate the economy, including cutting interest rates for the first time in nearly five years and injecting over $25 billion into the banking system to ease a cash crunch. However, loan expansion needed for investment remains patchy, and some experts believe that interest rates won’t come down far enough to significantly boost the economy
For the economy to recover, growth needs to be broad-based. Currently, wage growth in cities is slow, and the country is struggling to generate enough jobs for its young population, which dampens consumer spending. While the service sector has held up reasonably well, it is not enough to drive the entire economy forward
Some analysts argue that the market has not yet reached a true bottom, as typical downturns, such as the dot-com bust of the early 2000s and the financial crisis of 2008, took extended periods to fully play out This suggests that the current market slide may continue, and stocks may not yet be cheap enough to be considered a buying opportunity.
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