Indian Stocks' Rs 24-Lakh Crore Rout Triggers Worst Losing Streak Since 2001

Indian benchmark indices are poised to close January with a fourth consecutive month of decline, the longest since 2001, as muted earnings amid a slowing economy and geopolitical woes weigh on domestic stocks. 

The key stock gauge — NSE Nifty 50 — is down 2.04% this month, taking the fall to over 11% from October. The last time the index saw four consecutive months of decline was in September 2001, when it recorded a fall of 22%. 

In the last 23 years, Nifty has fallen for three months in a row 13 times. In about 70% of these falls, the index bounced back in the next three months, with an average gain of nearly 5%, according to the data compiled by NDTV Profit. 

While the benchmark index trades in the so-called ‘correction’ zone, the broader market saw an even deeper selloff. Small-cap stocks briefly hit ‘bearish’ territory, falling over 20% from their previous high. 

Nifty Midcap and Smallcap indices are on course to record the biggest monthly fall since March 2020. The Nifty Next 50—the next rung of liquid securities after the Nifty 50—trades over 20% below their peak last September.  

The Rs 24-lakh crore selloff in the index comes at a crucial time, as Finance Minister Nirmala Sitharaman is all set to unveil the 2025 union budget this Saturday. Raising disposable income and boosting rural and urban demand will be the top agenda to revive economic growth.

The Reserve Bank of India's policy meeting on Feb. 7 will also be a key event to watch out for, as Jefferies expects the central bank will take a growth-favoured approach.

Retail investors, who have been on the rise in their ownership of small-cap stocks, were among the worst hit. As of the September quarter, domestic institutions and global funds hold 24.53% and 21.76% of the free-float value in small-cap companies, respectively. Retail investors, however, hold nearly an all-time high of 27.06%. 

Muted earnings amid expectations of more downgrades, slowing economic growth, lower capex and volatility fueled by Donald Trump's proposed tariff policies are among the key triggers for the turmoil in the market. 

For analysts at Morgan Stanley, the current selloff is a buying opportunity, with an understanding that it is hard to time the bottom. "A growth slowdown has unnerved the market and believe that growth is returning soon," the brokerage said in a note earlier.

The price fall has been on falling trading volumes implying an absence of a bid rather than a forceful selling, it said. "Retail investors have exhibited resilience," and important reasons for the slow growth patch are getting behind, it said.

India, along with its Asian peers, is expected to remain volatile in the first half of the year, given the new US President Donald Trump's tariff policies. In a preemptive move, India will likely slash customs duty on high-end goods from the US, NDTV Profit reported earlier.  

Global funds have offloaded over Rs 98,584 crore since December 2024— after a record exodus from September to November. In the last four months, the local stocks saw an outflow of Rs 2.59 lakh crore by foreign investors.

Domestic institutions and retail investors continue to back the domestic market. Since October 2024, these fund houses have bought stocks worth Rs 2.68 lakh crore, according to data from NSE. 

IndusInd Bank Ltd. was the top loser in the Nifty 50, with a fall of over 35% from Sept. 27, when the benchmark last hit a fresh high. Asian Paints Ltd. plunged nearly 33%, while Bajaj Auto Ltd. tumbled 32%. Hero MotoCorp Ltd. and Bharat Petroleum Corp. complete the list of the top five losers. 

The information technology pack was the outperformer during the rout as expectations of revival sparked demand for these stocks. Since Sept. 27, Wipro Ltd. rose 15.3% while Tech Mahindra was up 4.6%. Eicher Motors Ltd. and Kotak Mahindra Bank Ltd. were the remaining gainers during the period.