Sensex, Nifty down 12% from highs but sectoral indices fall more than 20% to enter bear market territory

sectoral indices like BSE Auto, BSE IPO, BSE Telecommunications, BSE Consumer Durables, BSE SmallCap, BSE MidCap, and BSE Manufacturing are approaching the 20 percent threshold.

The benchmark indices, Sensex and Nifty, have declined around 12 percent from their September highs. However, a closer look at sectoral indices reveals a deeper downturn, with several sectors plunging over 20 percent, officially entering bear market territory—a term used when an asset or index drops by 20 percent or more within a short period.

Analysts attribute this downturn to sustained foreign investor outflows, driven by concerns over slowing economic growth, weaker corporate earnings, and fears of tariff wars following the election of US President Donald Trump.

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Among the steepest declines, the BSE Power Index tumbled over 30 percent from its recent peak, followed by the BSE Utilities Index and BSE India Infrastructure Index, which have fallen 28.7 percent and 27 percent, respectively. Other sectoral indices, including BSE Oil & Gas, Realty, Energy, PSU, Industrials, Metal, Capital Goods, and Consumer Discretionary, have witnessed declines exceeding 20 percent each.

Additionally, sectoral indices like BSE Auto, BSE IPO, BSE Telecommunications, BSE Consumer Durables, BSE SmallCap, BSE MidCap, and BSE Manufacturing are approaching the 20 percent threshold.

Is this a bear market?

Despite the widespread downturn, analysts suggest that this correction represents a temporary pause in India’s long-term bull trajectory rather than a definitive shift to a bear market.

Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, explains that stock prices are fundamentally linked to earnings. He attributes the current correction to short- to medium-term earnings contraction and elevated valuations across sectors like energy, power, capital goods, and auto.

Tepid quarterly results have heightened investor caution, but Bathini underscores that this phase of consolidation is a natural part of the secular bull market underway in India. Midcap and small-cap stocks have similarly corrected by over 20 percent from their peaks, but Bathini views this as a time-based adjustment rather than a structural downturn.

Meanwhile, Devarsh Vakil, Head of Prime Research at HDFC Securities, sees opportunities in the current environment. While small-cap stocks have faced corrections, he highlights attractive valuations in select segments such as consumer durables, banking, chemicals, pharmaceuticals, building materials, and real estate.

Samco Securities research highlights a bearish head-and-shoulders pattern forming in the US 10-year bond yield—a technical signal often associated with a reversal in an uptrend. Historically, US bond yields and the Nifty 50 index exhibit a strong inverse correlation. Rising bond yields typically pressure equity markets by increasing borrowing costs and prompting investors to favour safer assets. In contrast, declining yields ease liquidity constraints, fostering capital inflows into equities, particularly in emerging markets like India.

Apurva Sheth, head of market perspectives and research at Samco Securities, anticipates that falling US bond yields could reverse market trends, especially in the lead-up to India’s budget. Benchmark indices Nifty and Sensex have already shown signs of recovery, snapping their losing streak to close in positive territory.

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