India’s stock market is staring down a historic milestone—one it would rather avoid. The Nifty50 index is on track for its longest losing streak in nearly three decades. If February ends in the red, it will mark five straight months of decline, a rare event last seen in 1996.
Foreign Investors Flee as Rupee Weakens
Panic has set in among investors, with foreign institutional investors (FIIs) pulling out a staggering Rs 2 lakh crore since October 2024. A weakening rupee is making emerging markets less appealing, and India is feeling the brunt of it.
The index has already lost 3% this month. Technical analysts suggest that as long as it stays below 22,850, the downward trend will persist, with a potential drop to 22,400–22,500 in the short term.
“We’re in a lower top–lower bottom formation. Sellers are unloading stocks at every rise, showing how weak the sentiment is,” said Rupak De, Senior Technical Analyst at LKP Securities.
How Bad Can It Get? Looking Back at History
Long stretches of consecutive monthly declines have been rare in Indian markets. Since 1990, Nifty has witnessed a five-month or longer losing streak only twice before.
- 1994–1995: The index crashed 31.4% over eight months from September 1994 to April 1995.
- 1996: A five-month drop from July to November saw a 26% correction.
- 2024–2025: The current decline stands at 11.7% from October till last Friday, milder compared to past crashes but still concerning.
If February closes in the red, it will be only the third time in 34 years that the index has fallen for five straight months.
China’s Comeback is Hurting India’s Markets
One of the biggest reasons behind the slump is a dramatic shift in global capital flows. China’s markets, battered for much of 2023 and early 2024, are bouncing back. The Hang Seng Index has surged 18.7% in just one month, while India’s Nifty50 has slipped 1.55% in the same period.
Since October, India’s market capitalization has shrunk by $1 trillion, while China has added $2 trillion. Bank of America Securities notes that global funds are now flowing back into Chinese equities at the expense of India.
Vaibhav Porwal, Co-Founder of Dezerv, attributes this shift to China’s stimulus efforts. “China’s September 2024 economic stimulus package, which includes policy support and regulatory easing, has made Chinese stocks far more attractive to foreign investors,” he explained.
What’s Next for Investors?
Despite the bearish trend, analysts say opportunities still exist. SBI Securities suggests a bottom-up stock-picking approach, focusing on companies with strong fundamentals rather than chasing trends.
- Avoid micro-cap stocks with annual profit pools below Rs 100 crore, as they remain high-risk.
- Consider tax harvesting strategies over the next few weeks to optimize returns.
- Accumulate fundamentally strong stocks where valuations look attractive.
Some experts believe the tide will turn for FIIs sooner rather than later. “US dollar longs and US asset concentration have hit unsustainable levels. A shift back to emerging markets is inevitable, and when it happens, India will get its fair share,” said seasoned investor Sandip Sabharwal.
Motilal Oswal Private Wealth cautions that while the Nifty50’s one-year forward P/E is below its long-term average, mid-cap and small-cap valuations remain stretched. More than 40% of midcaps and 35% of smallcaps are trading at a P/E above 50, suggesting froth in the broader market.
For now, all eyes are on February’s closing numbers. If Nifty fails to bounce back, history will be made—for all the wrong reasons.
