The Nifty 50 index has been under immense pressure, recording one of its longest losing streaks in nearly three decades. After attempting to hold support at 22,800 multiple times, it finally closed below that level, triggering a fresh round of selling. But what led to this downturn? One of the key reasons is the turbulence in the U.S. markets. Let’s dive into the details.
Nifty’s Longest Losing Streak in 28 Years?
The Nifty 50 is on the verge of its longest monthly losing streak in 28 years if it closes in the red this month. Looking at historical data:
- September 1994 to April 1995: Nifty fell for seven consecutive months, dropping 31.4%.
- July to November 1996: Five consecutive monthly losses with a 26% decline.
- 1991, 1998, 2001: Four-month losing streaks with declines of 28%, 26%, and 21% respectively.
If February also ends in red, this would be the longest streak since 1996. However, the magnitude of the fall is relatively lower—currently at around 14%, compared to the historical peak of 31.4%.
What Triggered Friday’s Market Crash?
1. U.S. Market Jitters and S&P Global Report
On Friday, February 21, the market saw a fresh round of selling, triggered by a report from S&P Global that pointed to a slowdown in the U.S. economy. Despite strong Q4 earnings in the U.S., this report suggested a decline in optimism. The S&P 500 had hit an all-time high on February 19, but following the report, markets saw a sharp downturn.
Key Takeaways from the S&P Global Report:
- U.S. PMI Composite Output fell from 52.7 in January to 50.4 in February, a 17-month low.
- Manufacturing output increased, reaching an 11-month high at 53.8, indicating no major concerns.
- Services sector plunged to a 25-month low, dropping below the critical 50 level, signaling contraction.
- Input costs rose sharply, while companies struggled to pass them on to consumers, leading to shrinking profit margins.
- Concerns over Federal policies, including tariffs and spending cuts, added further pressure on the markets.
2. Trump’s Tariff Plan – A Potential $7 Billion Blow to India
Former U.S. President Donald Trump has proposed a new wave of rapid tariffs, set to take effect in April 2025. According to a Citi Research report, these tariffs could result in $7 billion in annual losses for the Indian economy. If imposed, they could impact trade relations and corporate profitability, further dampening market sentiment.
3. The China Factor – FII Selling in India
Since October 2024, India has lost $1 trillion in market capitalization, while China has gained $2 trillion. Foreign Institutional Investors (FIIs) have been shifting their focus from India to China, reducing their Indian allocations to a two-year low, as per a Bank of America report. In 2025 alone, FIIs have sold over ₹1 lakh crore (₹1 trillion) worth of Indian equities.
However, with India’s valuations already at multi-year lows, the selling pressure could ease, and capital might rotate back from China to India in the future.
What Lies Ahead?
While the market correction is painful, it’s essential to look at the bigger picture:
- The Indian economy remains fundamentally strong.
- FII outflows might slow down as India’s valuations become attractive.
- Global uncertainties, including U.S. economic policies and inflation, will play a crucial role in shaping market movements.
For investors, this period presents both risks and opportunities. Staying informed and having a long-term perspective will be crucial in navigating the volatility.
