Equity markets Nifty and Sensex endure their longest weekly losing streak in half a decade, due to apprehensions over trade disputes and earnings reports
The Indian equity market has been facing a challenging period, with the Nifty 50 and Sensex experiencing a prolonged losing streak. This trend, which marks the longest since April 2020, is attributed to a complex mix of factors, including U.S. tariffs, global trade tensions, domestic economic indicators, and the prospects of a U.S.-India trade deal.
On Wednesday, the Reserve Bank of India (RBI) held rates steady, but flagged tariff-related risks to the economy. This decision, coupled with escalating U.S. tariffs, has unsettled global trade flows and negatively impacted market sentiment in India. The uncertainty and cautious investor behaviour worldwide have been further exacerbated by ongoing uncertainty over a potential U.S.-India trade deal and underwhelming earnings.
Foreign Institutional Investors (FII) have been net sellers recently, with significant daily and monthly outflows putting downward pressure on equity prices and weakening the Indian rupee. This weakening of the rupee, in turn, raises import costs and inflation concerns.
India’s industrial output remains sluggish, with inflation staying above the RBI’s comfort zone of 4%, and manufacturing activity showing slowing momentum. These factors have dampened growth expectations and affected earnings forecasts, leading to market caution.
However, there are signs of market resilience. Periodic rebounds in the market driven by strong domestic buying—especially in PSU banks and real estate sectors—demonstrate this resilience, supported by India’s underlying economic fundamentals and corporate performance.
Brokerages such as Bank of America (BofA) expect muted returns overall for 2025, forecasting the Nifty to trade around 25,000 with limited upside. However, they suggest better returns from selective sectors like IT (recently upgraded to Overweight), materials, auto components, and travel and tourism. Small and mid-cap stocks are expected to underperform.
The future trajectory of the Indian equity market will depend heavily on developments in trade relations, particularly a possible U.S.-India trade deal, and domestic economic data. While there is no definitive outcome yet, the possibility of a trade agreement between the U.S. and India remains a watchpoint for investors. Such a deal could mitigate tariff-related headwinds and improve the sentiment around trade policies, potentially benefiting market performance.
In conclusion, Indian equity benchmarks currently face downside risks due to U.S. tariffs and global trade tensions, combined with domestic economic sluggishness and FII selling. However, market resilience is visible, driven by strong sectoral performances and domestic investor interest, with selective sectors likely to outperform. The future trajectory will depend heavily on developments in trade relations and domestic economic data.
- The turbulence in the Indian equity market has sparked interest in personal-finance discussions, as investors seek advice on How to navigate the complex mix of factors affecting business, such as U.S. tariffs, global trade tensions, and political uncertainties in potential trade deals.
- The escalating technological advancements in the field of investing have provided opportunities for savvy investors to leverage tools and strategies like algorithmic trading for executing trades in the challenging market conditions, such as the ongoing uncertainty surrounding the U.S.-India trade deal.
- Over the past year, general-news coverage of the Indian equity market has been dominated by negative headlines about the prolonged losing streak and FII selling, but crime-and-justice articles have also gained prominence, as fraudulent activities involving companies and markets come to light, causing further unease among investors.
- As the Indian equity market grapples with its current challenges, policymakers and businesses alike must work together to create a more supportive environment for finance and investing, focusing on measures to boost consumer confidence, improve economic indicators, and attract investments from FIIs to help invigorate the economy.
