Nifty's Longest Losing Streak Since 1996: Is a Reversal on the Horizon?
The Indian equity index Nifty concluded February with its fifth consecutive monthly decline, marking its longest losing streak since its inception in 1996. This prolonged slump has eroded approximately Rs 85 lakh crore in investor wealth from its peak in late September, leaving many portfolios significantly impacted.
Historical Context of Nifty Declines
Historically, Nifty has experienced prolonged declines of four or more months only six times. One notable period occurred from September 1994 to April 1995, before Nifty's official launch, during which the index plummeted by 31.4% over eight consecutive months (based on backdated calculations). Since its launch in April 1996, the worst monthly losing streak occurred from July to November 1996, with a 26% drop over five months.
In contrast, the current decline has been relatively milder, with an 11.68% drop over the last five months. Previous declines often reached double-digit percentages.
Market Carnage Since September Peak
Since the market peaked on September 27, investors have witnessed a substantial erosion of wealth. The total market capitalization of BSE-listed companies has decreased by Rs 85 lakh crore to Rs 393 lakh crore. Nifty has declined by 14% from its peak, while the Nifty Next 50 has fallen nearly 25%. Smallcap and microcap stocks have experienced even steeper declines, plummeting by 24-25%, pushing them into bear market territory.
Expert Analysis and Market Outlook
Emkay Global views the correction as a de-frothing of valuations, making Nifty more attractive below 22,500 levels, at 19.2x 1YF P/E. They consider financials as the best trade amid RBI’s easing stance but recommend using this opportunity to lighten positions due to valuations being out of sync with medium-term growth. Their preferred sectors include consumer discretionary, healthcare, and telecom.
Kotak Institutional Equities anticipates the index to remain range-bound this year, trading at a premium compared to the MSCI EM Index. They foresee downside risks to earnings growth estimates but believe strong medium-term growth prospects and improved liquidity conditions in the latter half of FY26 could limit the downside.
Foreign Institutional Investors (FIIs) have withdrawn over $20 billion from Indian equities and bonds since October 2024, representing one of the most significant outflows in recent history.
Prabhudas Lilladher has cautioned that persistent global uncertainty, weak domestic demand, and sustained FDI outflows could increase volatility in both currency and FPI flows in the near term. However, they expect FII outflows to peak within 4-9 months and anticipate an improvement in India’s growth outlook in FY26, driven by higher capex spending and potential tax cuts.
Is the Worst Over?
While the current selloff marks the longest monthly losing streak, it is less severe compared to past downturns. Historical patterns suggest that the worst of FII sell-offs tend to subside within a few quarters. With improving fiscal policies, infrastructure spending, and a potential recovery in consumer demand, market participants will closely monitor liquidity trends and macroeconomic factors to assess whether Nifty’s extended slump is nearing its end.
Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.
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