A first in 29 years! Nifty sees fifth straight monthly decline as valuation worries persist

With uncertainty gripping global markets and India navigating its most challenging market phase in years, investors are bracing for what could be a long road to stability.

The Indian stock market is staring at a historic slump -- Nifty50 has declined for five straight monthly F&O expiry cycles, marking its worst monthly losing streak in 29 years.

The sell-off has been relentless, fueled by weak corporate earnings, persistent foreign outflows, and mounting economic uncertainty. Investors who cheered record highs just four months ago are now grappling with losses, as the Nifty50 and Sensex have slumped around 4 percent in February alone, extending their declines to 14 percent and 13.2 percent, respectively, from their peaks on September 27, 2024.

Also read: Indian markets plunge 20% but history shows worse crashes have come and gone

A losing streak of this magnitude is rare. The last time the Nifty endured five consecutive months of decline was between July and November 1996. Before that, its longest slide stretched for eight months, from September 1994 to April 1995.

Small- and mid-cap stocks, typically the hardest hit during market downturns, have taken a severe beating this year, tumbling 14 percent and 19.2 percent, respectively. Despite the sharp correction, experts caution that valuations remain elevated, urging investors to tread carefully in this space.

What more, it doesn't seem that markets are nearing their bottom anytime soon. Analysts at Kotak Institutional Equities remain cautious, expecting stocks to drift without clear direction in the coming months as the market digests years of strong returns. They argue that despite the correction, overall 12-month returns remain flat, making it difficult to find compelling value-buying opportunities. Elevated valuations, the risk of earnings downgrades, and dwindling foreign investor interest in emerging markets have added to the uncertainty.

Read more: RBI closely monitoring capital position of small finance banks, few may be forced to shore up buffer

However, not everyone is pessimistic. Citigroup has taken a contrarian stance, upgrading Indian equities to Overweight from Neutral, citing less-demanding valuations and India’s potential to outperform, particularly if global tariff risks resurface.

In February 27 session, Indian equity benchmarks ended nearly flat on February 27, as gains in financial stocks were offset by weakness in autos. Financials rallied after the Reserve Bank of India eased lending norms for small borrowers and non-bank lenders, but investor sentiment remained cautious amid renewed tariff concerns. U.S. President Donald Trump signaled a delay in steep import duties on Mexico and Canada until April 2 while proposing a 25 percent reciprocal tariff on European cars and goods.

By the close, the Sensex slipped 37 points to 74,564, while the Nifty50 lost 38 points, or 0.2 percent, to 22,509. Market breadth was weak, with 477 stocks advancing and 2,146 declining on the NSE.

With uncertainty gripping global markets and India navigating its most challenging market phase in years, investors are bracing for what could be a long road to stability.

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