Indian stocks have experienced unprecedented turbulence this February, with the Nifty 50 index recording its longest losing streak since its inception, enduring five consecutive months of decline. This marks the first such downturn since 1996, leading to staggering losses of Rs 85 lakh crore in investor wealth since the peak on September 27, 2023. Despite this rough patch, analysts cautiously speculate on potential recovery.
Since reaching its all-time high, the Nifty has lost 14%, with even harder hits felt across other market segments. The Nifty Next 50 has seen declines of nearly 25%, and small-cap and micro-cap stocks have plummeted by about 24-25%, pushing many deep underground bear market territory.
The present decline may appear to lack the savagery of other historic downturns, like the catastrophic losses witnessed during the 1994-95 period, where the Nifty fell by 31.4%, or the 26% drop during 1996. Predictions earlier this year indicated market bears would dominate the short-term trends, leading traders and analysts to brace for the worst. Some analysts are now pondering whether the current lows indicate the bottom, or hint at the commencement of intensified declines.
Analysts at Emkay Global view the current situation as alleviating inflated valuations, positioning the Nifty as more attractive at levels below 22,500, currently trading at 19.2 times its one-year forward earnings. They recommend the consumer discretionary, healthcare, and telecom sectors as attractive trades, cautioning investors to reassess their positions due to persistent valuations misaligned with medium-term growth perspectives.
Meanwhile, Kotak Institutional Equities emphasizes the likelihood of the index staying range-bound this year, as the Nifty currently trades at around 19 times forward earnings for March 2026, sharply above the MSCI EM Index's valuations, indicative of potential downsides to earnings growth expectations. Despite prevailing foreign outflows totaling over $20 billion from Indian equities and bonds since October 2024, which is among the steepest recorded, analysts still forecast moderate recovery prospects fueled by India’s fiscal policies and infrastructure spending.
Highlighting individual companies, several stocks were noted at 52-week lows, including DLF, Tata Motors, IRCTC, and State Bank of India (SBI), which are under significant selling pressure currently. SBI currently trades at Rs 701.10, its price reflecting substantial selling activity, creating pockets of opportunities for long-term investors.
SBI has been particularly under scrutiny due to its current market price hovering around its 52-week low, which presents buying potential for investors. A breakout above Rs 862.23 could signal upward movement. Similarly, Tata Motors is assessing significant support at Rs 645.65, also its 52-week low point, with Fibonacci retracement levels identifying strong resistance nearing Rs 975.26.
Conversely, DLF’s stock is teetering near its fiscal low of Rs 640.00. Stock analysts perceive this as indicative of potential rebounds for long-term investors. HCL Technologies also exhibits bearish tendencies technically, closing down nearly one percent recently.
While on the other hand, SBI Cards and Payment Services Ltd saw share prices gain 3% during intraday trades last Thursday, buoyed by the declaration of interim dividends amounting to Rs. 2.50 per equity share on February 25. The stock opened at ₹842.15, reflecting optimism following the dividend announcement from the company.
Chandan Taparia, Head of Derivatives and Technicals at Motilal Oswal, contemplates this development suggests bullish momentum, targeting prices to move to Rs 885 with expectations for supportive stop-loss measures. HSBC Securities and Capital Markets has also upgraded the stock to ‘Buy’ status from ‘Reduce,’ citing favorable developments post-Q3 results. This upgrade arises from positive trends surrounding asset quality and card issuance improvements.
Despite historical lows and possible market volatility, many analysts posit the worst may have passed. Global uncertainties, tepid domestic demand, combined with external economic pressures could continue triggering wary sentiments among market investors. Nonetheless, historical precedents imply eventual recovery from substantial sell-offs with appropriate macroeconomic adaptations expected to emerge later this fiscal year.
Onlookers and investors must keep close tabs on liquidity trends and macro factors to determine if the Nifty index's persistent slump is approaching its resolution point. With economic indicators hinting stability, analysts project liquid trends alongside fiscal studies may signal brighter horizons for Indian equities, with investment opportunities likely to become more alluring amid potential rebounds.