Source The economics Times
Mumbai: Indian equity markets have witnessed a sharp and sustained selloff over the past six trading sessions, wiping out nearly ₹18.5 lakh crore in investor wealth as benchmark indices Sensex and Nifty came under heavy pressure. The BSE Sensex has plunged around 2,900 points during this period, while the NSE Nifty has slipped close to 3%, reflecting broad-based weakness across sectors.
The recent correction has been driven by a combination of global and domestic factors that have dented investor sentiment and triggered risk-off behaviour on Dalal Street.
Global headwinds intensify
Rising global uncertainties have played a major role in the ongoing selloff. Persistent concerns over higher-for-longer interest rates in the United States, following hawkish signals from the US Federal Reserve, have led to renewed volatility in global markets. Elevated bond yields have reduced the attractiveness of equities, prompting foreign investors to pull money out of emerging markets, including India.
Additionally, geopolitical tensions and worries about slowing global economic growth have added to risk aversion, pushing investors towards safer assets.
Foreign investors turn net sellers
Foreign institutional investors (FIIs) have remained aggressive sellers in recent sessions, exerting significant pressure on frontline indices. Continuous FII outflows have weighed heavily on large-cap stocks, particularly in the banking, IT, and financial services space, which hold a high weightage in benchmark indices.
Market experts note that any sustained reversal in FII flows will largely depend on stability in global markets and clarity on the US interest rate trajectory.
Valuation concerns and profit booking
After a strong rally over the past months, Indian equities were trading at relatively expensive valuations compared to peers. The recent downturn has been exacerbated by profit booking, especially in stocks that had seen sharp run-ups. Investors appear to be locking in gains amid uncertain global cues and ahead of key macroeconomic events.
Midcap and smallcap stocks have also come under pressure, as risk appetite in the broader market has weakened.
Domestic triggers add to pressure
On the domestic front, concerns over corporate earnings growth, rising input costs in select sectors, and cautious management commentary have further dampened sentiment. Some sectors, such as IT and export-oriented companies, are facing headwinds due to weak global demand and currency volatility.
Meanwhile, caution ahead of upcoming economic data and policy signals has kept investors on the sidelines.
What lies ahead
Market participants believe volatility may persist in the near term as global cues continue to dominate investor sentiment. Analysts advise investors to remain cautious, focus on fundamentally strong companies, and avoid panic selling. While the recent correction has eroded significant market capitalisation, experts see it as a healthy consolidation if macroeconomic fundamentals remain intact.
For long-term investors, the ongoing selloff could offer selective buying opportunities once clarity emerges on global interest rates, inflation trends, and earnings growth outlook.
