The Indian stock market is going through a particularly rough phase as benchmark indices took a sharp dive on Friday, reflecting widespread investor concern over global and domestic factors. The Sensex plummeted by more than 1,400 points, while the Nifty slipped over 1%, signaling a significant downturn. The market selloff has led to a substantial loss of investor wealth, with the market capitalization of BSE-listed companies shrinking by nearly ₹7 lakh crore. This sharp correction is primarily attributed to weak global cues, persistent selling by foreign institutional investors (FIIs), and growing fears of an economic slowdown fueled by geopolitical and policy uncertainties.
One of the key triggers behind this downturn is former U.S. President Donald Trump’s latest tariff threats, which have reignited fears of a potential trade war. His recent announcement of a 25% tariff on European Union imports has sent shockwaves through global markets, adding to the volatility. Additionally, Nvidia’s mixed quarterly results have contributed to the nervous sentiment among investors. According to Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stock markets inherently dislike uncertainty, and Trump’s policies have consistently introduced unpredictability into the global financial landscape. He pointed out that since Trump’s election, his aggressive stance on tariffs has had a lasting impact on global trade dynamics. His latest move of imposing an additional 10% tariff on Chinese goods confirms the market’s expectation that he will continue using tariffs as a strategic tool to pressure other countries before negotiating deals that favor the U.S.
Despite these concerns, Vijayakumar believes that the markets have not yet fully priced in the possibility of a full-fledged U.S.-China trade war. While such an escalation is unlikely at the moment, the increased uncertainty has led to a sharp spike in market volatility. The Chicago Board Options Exchange’s (CBOE) Volatility Index (VIX), often referred to as the “fear gauge,” has surged to 21.13, indicating heightened anxiety among traders and investors about future market stability. This index measures the expected volatility in the market over the next 30 days and is widely used as an indicator of investor sentiment. A rising VIX typically signals increased fear and risk aversion among market participants, leading to more cautious trading behavior.
Looking ahead, market experts suggest that a recovery could be expected in March, driven by improved macroeconomic conditions and a potential slowdown in FII selling. Vijayakumar noted that large-cap stocks are currently trading at fair valuations, with some even appearing attractive. As a result, FIIs are unlikely to sustain their aggressive selling in the coming months. He advised long-term investors to take advantage of the current market weakness by gradually accumulating high-quality large-cap stocks. Additionally, he pointed out that select stocks in the broader market, particularly in the defense sector, could offer good buying opportunities due to the corrections they have undergone over the past few months.
However, in the immediate term, the outlook for the Nifty remains uninspiring. Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, highlighted that the Nifty has been moving sluggishly, describing its recent performance as resembling that of a “tortoise.” He noted that technical indicators suggest the index needs to surpass the critical resistance level of 24,074 to show signs of strength. On the downside, the Nifty faces potential risks at 22,300 and 21,281. Given the prevailing uncertainty, traders have been advised to take short positions in Nifty and Bank Nifty, while stocks such as Adani Enterprises, MCX, and SBI are expected to face further intraday bearish pressure. For Adani Enterprises, specific downside targets have been identified at 2,025, with more aggressive targets at 1,900.
Sector-wise, the decline has been most pronounced in IT and auto stocks, with the Nifty IT and Nifty Auto indices seeing sharp drops. Information technology firms have struggled amid global economic concerns, while the auto sector has also come under pressure, with stocks like Bajaj Auto and Hero MotoCorp breaking key support levels. Aditya Gaggar, Director of Progressive Shares, noted that the auto sector is expected to continue trading lower, as several key stocks have breached their downside ranges. The realty sector has also shown signs of weakness, having broken its previous swing support, which suggests that any near-term rallies will likely face strong selling pressure at higher levels. Meanwhile, the metals sector is expected to remain under pressure, continuing its negative bias and testing the lower end of its consolidation range.
Despite the ongoing volatility and sharp declines, market experts have urged investors not to panic. While the selloff has undoubtedly rattled investors, particularly retail participants, analysts suggest that this correction should be viewed as a buying opportunity for those with a long-term perspective. Blue-chip stocks that have become more reasonably valued during this downturn could offer strong potential for future gains. Some brokerage firms have also pointed out that defense stocks, in particular, present an attractive investment option due to the significant corrections they have undergone in recent months.
The road ahead remains uncertain, with global geopolitical developments and domestic economic factors playing a crucial role in determining the market’s trajectory. While the near-term outlook remains volatile, experts believe that March could bring some relief if macroeconomic indicators show improvement and foreign investor selling subsides. Until then, investors are advised to remain cautious, focus on high-quality stocks, and adopt a disciplined approach to portfolio management. For traders, managing risk effectively and staying updated on global and domestic cues will be key to navigating the current market conditions successfully.
