Indian stocks are on a four-month losing streak, set for their worst such run in 23 years as weak earnings, foreign outflows and economic uncertainty have taken the wind out of the sails of a market that hit record highs just four months back.
The Nifty 50 (.NSEI) and Sensex (.BSESN) have lost about 3% each in January, the second most in the four-month losing run. They have now tumbled 12.6% and 11.7%, respectively, from their record highs hit on Sept. 27, 2024.
They are now even below the levels in early June when Prime Minister Narendra Modi's election victory sparked a rally to record highs.
The slide started in October as the quarterly earnings reports started coming in.
About 60% of the Nifty 50 members posted results that either met or missed market estimates, their worst performance since March 2020, hurt by curbed government spending post-elections, above-normal rains and rising inflation.
The Nifty tumbled 6% that month, also its biggest slide since March 2020.
The gloom continued into the October-December quarter, with the markets now also facing a resurgent dollar and the threat of U.S. tariffs since Donald Trump won the U.S. presidential elections.
A gauge for measuring Nifty returns in U.S. dollar terms (.DNIFTRI), fell 4.25% in January alone, compared with a 7% jump in 2024 and a 21% increase in 2023.
India's benchmark indexes gained about 8.5% in 2024, the least among major global peers, and their slide in January has been more than these peers.
FOREIGN INVESTORS FLEE
Foreign portfolio investors (FPI) have pulled out $8.3 billion from Indian equities this month through Jan. 28, set to second only to the record $11.18 billion of outflows in October last year.
The stronger dollar, elevated U.S. yields, tariff worries, sluggish domestic economic growth and high stock valuations will only drive more FPIs away, said Sanjeev Hota, vice president and head of research of wealth management at Mirae Asset Sharekhan.
SMALL-CAPS, MID-CAPS CATCH UP
While the large-caps racked up records dating back to 2020 in October, the rest of the market is only just catching up.
This month, the small-caps (.NIFSMCP100) and mid-caps (.NIFMDCP100) have plunged about 15% and 10%, respectively, in their worst monthly performance since March 2020.
In fact, the small-caps have fallen nearly 19% from their record highs notched in December 2024, while the mid-caps have dropped 15.5% from their all-time high.
Both indexes are headed towards a bear market.
"Most small and midcaps stocks have gone up between 2x and even 6x in the last two years. To justify where these stocks are trading at current levels with their earnings is extremely difficult in a dicey macroeconomic environment," said Mayuresh Joshi, head of equity research India at William O'Neil and Company.
