The Indian stock market has been on a downward spiral, with the NIFTY 50 shedding over 6% in February 2025 alone. The index even touched an intraday low of 22,120 today, reflecting a broader market downturn. The NIFTY Midcap 150 has also seen a 3% decline, trading around 17,670.40 as of midday on February 28.
This correction isn’t a one-off event; it’s part of a larger decline that began in late 2024. In the past five months, the NIFTY 50 has lost around 15% from its peak, marking one of the longest losing streaks in decades. Investors who enjoyed the bull run of 2023 and early 2024 are now facing a harsh reality check. So, what’s driving this downturn?
The Key Factors Behind the Market Fall
1. Global Uncertainty and Trump's Tariff Threats
The return of U.S. President Donald Trump has added volatility to global markets. His administration, which took office in January 2025, has reiterated plans to impose tariffs on imports from India and China. This has led to investor anxiety, particularly in India’s IT and manufacturing sectors, which depend on U.S. exports. As a result, global funds are adopting a risk-off approach, impacting Indian equities.
2. Foreign Institutional Investors (FIIs) Exiting in Large Numbers
FIIs have been offloading Indian stocks aggressively. So far in 2025, over ₹1 lakh crore has been withdrawn from Indian equities, with January alone witnessing outflows of ₹78,027 crore. This large-scale selling has contributed significantly to the NIFTY 50’s decline. Investors are shifting their focus to alternative markets, such as China, which is up 0.23% this year, while India struggles under selling pressure.
3. Disappointing Corporate Earnings
Earnings reports from NIFTY 50 companies have failed to meet investor expectations. The latest quarterly results showed the weakest profit growth in five years, raising concerns about a broader economic slowdown.
Some key sectors have been hit particularly hard:
- NIFTY IT Index fell 4% in a single session this week.
- NIFTY Midcap 100 and Smallcap 100 are down 20% and 23% year-to-date, respectively.
- Metal and telecom stocks are among the worst performers
4 Economic Slowdown Fears
- India’s GDP growth is projected to slow to 6.4% in 2025, down from 6.6% in 2024, according to Moody’s Analytics. Several macroeconomic challenges are weighing on sentiment:
- Rising crude oil prices are increasing inflationary pressures.
- The weakening rupee is making imports costlier.
- Global demand is slowing due to concerns over U.S. tariffs.
- The Human Metapneumovirus (HMPV) outbreak in Karnataka and Gujarat is further dampening sentiment.
Disclaimer
The information provided in this article is for educational and informational purposes only and does not constitute financial advice or investment recommendations. The NIFTY 50 and other market data mentioned reflect trends as of February 28, 2025, based on available information and may change. Stock market investments carry inherent risks, and past performance is not indicative of future results. Readers should conduct their own research or consult a qualified financial advisor before making investment decisions. The author and blog are not responsible for any financial losses or decisions made based on this content.
