Nifty logs fourth straight monthly loss in January, worst streak since 2001

Amid slowing growth, the Sensex and Nifty have plunged over 11 percent since their peak in September 2024.

India’s benchmark Nifty index is set to close lower in January, marking its fourth consecutive monthly decline and the longest losing streak since 2001.

Both the Sensex and Nifty fell nearly 1.8 percent each in January. For the Sensex, this marks its second straight monthly decline, while for the Nifty, it is the fourth consecutive month of losses—the longest since September 2001.

The persistent volatility in local equities has been driven by sustained foreign investor selling amid slowing economic growth, which has hit a four-year low, coupled with tight liquidity, a strengthening dollar, weak earnings, and elevated valuations.

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According to Bloomberg research, the equity selloff could trim India’s GDP growth by as much as 50 basis points in the March quarter, while the resulting wealth erosion may further weigh on household consumption.

Amid slowing growth, the Sensex and Nifty have plunged over 11 percent since their peak in September 2024. Foreign Institutional Investors (FIIs) have offloaded over $20 billion in local equities since September, as weakening earnings momentum raises concerns over whether Indian stocks justify their valuation premium over emerging markets. In January alone, FIIs have sold over $8 billion in Indian equities.

Both Sensex and Nifty currently trade at around 19 times their estimated forward earnings, compared to a multiple of 12 times for the MSCI Emerging Markets Index, according to Bloomberg. In contrast, both indices were trading above 20 times earnings in late September.

Domestic institutional and retail investors, however, remain optimistic, banking on a resurgence in economic growth and India’s long-term prospects. Domestic Institutional Investors (DIIs) have bought over Rs 84,000 crore in local equities, while retail investors have invested over Rs10,000 crore so far in January.

Meanwhile, Indian markets closed higher for the fourth consecutive session as investors capitalized on recent dips. Despite mixed corporate earnings, optimism grew ahead of the Union Budget and RBI’s policy meeting next week.

The rally gained momentum after the RBI’s liquidity-boosting measures on January 27, fueling expectations of a rate cut in February. The central bank pledged Rs60,000 crore via open market operations and a $5 billion dollar-rupee swap auction on January 31. Experts see rising odds of a rate cut, citing weak growth, moderating inflation, and new MPC members.