What is weighing down stock market, key factors behind the decline

Nifty Decline 2025: There is a storm of recession in the Indian stock market. Nifty 50 is on the verge of registering its second biggest monthly decline in 30 years. This benchmark index of the National Stock Exchange (NSE) was launched in July 1990 and since then it has happened only twice that Nifty 50 has been in decline for five or more consecutive months.

The Indian stock market is in recession. Nifty 50 has declined 12.6% since October 2024. Donald Trump's policies and the rise of China's market have affected the Indian market.

Stock market is in recession

The current decline started from October 2024 and is still continuing. So far in February 2025, Nifty has slipped by 4%. Nifty has declined 12.6% in the last five months. Donald Trump's tariff policies, US Federal Reserve's strictness. The US Federal Reserve's hawkish stance, uncertain global conditions and the growth of the Chinese market have shaken the Indian stock market.

Since the beginning of 2025, FIIs have sold shares worth ₹1.3 trillion, the biggest sell-off of this period.

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Nifty has declined 12.6% in the last five months

Donald Trump's tariff policies, the US Federal Reserve's hawkish stance, uncertain global conditions and the growth of the Chinese market have shaken the Indian stock market. Since the beginning of 2025, FIIs have sold shares worth ₹1.3 trillion, the biggest sell-off of this period. Trump's 'America First' policies forced investors to exit emerging markets, causing a huge blow to the Indian stock market.

Trump's 'America First' policies forced investors to exit emerging

The tremendous comeback of the Chinese market has further increased the pain of this decline and the trend of 'Sell India, Buy China' has intensified. The figures are also confirming this. Since October 2024, India's market capitalization has declined by more than $1 trillion, while China has added $2 trillion. In the last one month, the Hang Seng Index has jumped 16%, while the Nifty has fallen by more than 2%.

That's why this fall is frightening

Although the Nifty has fallen by 13% so far, but if we look at the historical data, the average fall has been much more than this. In the last 30 years, the Nifty has been in a decline for four or more months continuously five times. In these cases, an average decline of 26.8% has been recorded.

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The biggest decline was recorded from September 1994 to April 1995, when the Nifty fell by 31.4%. In 1996 also, a decline of 26% was recorded during the 5-month decline. That is, history is witness that every time the Nifty has fallen like this, the loss has been more than 21.8%. This means that the Nifty can fall even more.

Will India's situation improve?

The valuation of the Indian stock market is expensive. India's premium valuation has been higher than other emerging markets like Indonesia, South Korea and Taiwan. However, India's growth story remains strong in the long term. Strong domestic demand, digital transformation and infrastructure expansion are expected to drive corporate earnings growth. Analysts believe that FIIs will return to India as earnings improve in the next 3-6 months.

India's growth story remains strong in the long term

The Chinese market boom may look strong at the moment, but its long-term economic challenges remain. Geopolitical tensions, unpredictable regulatory policies, and an aging population are putting pressure on China's growth prospects. This raises the question whether this boom in the Chinese stock market will be able to last for a long time?

India still attractive for long term investment

Market expert Sandeep Sabharwal believes that India will also bounce back soon. He said, "I think FII flows will improve for most emerging markets. When this happens, India, which accounts for 18-20% of the global portfolio, will also benefit from it."

Summary

Market experts say that India is still delivering solid growth rates. Fund managers may have sold Indian stocks, but they have not written off India completely. India-focused funds have seen inflows of $130 billion since 2022, so profit booking and a general correction were expected.

If India's fundamentals remain strong, foreign investors will come back, and the Indian stock market will regain its lost ground.