Indian Stock Market Faces Continued Downturn as FIIs Drive Massive Sell-Off: What’s Next for Nifty?

The Indian stock market is grappling with ongoing declines, largely driven by Foreign Institutional Investors (FIIs) pulling out massive sums. Since reaching an all-time high of 26,277 on September 27, Nifty has plummeted by nearly 10%, now hovering around the 23,500 mark. Analysts believe this downward trend is far from over, with some predicting that Nifty could potentially dip further to 21,300 by December.

Is a Bear Market Brewing?

Typically, a 10% drop from a record high is classified as a market correction, but if the fall extends to 20%, it signals the onset of a bear market. As Nifty has already witnessed a 10% decline, many analysts are considering this a potential early signal of a bear market.

Jay Bala from KasaDecos.com has stated, “I believe Nifty could drop to 21,300 by December end, while the banking index might hover around 42,000. A temporary pause might occur, followed by a potential rebound to 47,000 or even 49,000.”

The Impact of FIIs and Weak Q2 Earnings

FIIs have withdrawn ₹1.2 lakh crore from the market since Nifty’s peak in September. This sell-off is attributed primarily to weak Q2 earnings and subsequent downgrades. According to Lawrence Balanco of CLSA, this trend of underperformance may persist through the first quarter of 2025, with support expected around the 22,800 mark for Nifty, but a significant bounce-back seems unlikely in the near future.

Expert Advice for Investors

Given the current market uncertainty, many experts are advising caution. Jay Bala suggests that retail investors have an advantage over institutional investors during such times. He recommends staying out of the market and accumulating cash, as this strategy offers flexibility that institutional investors do not have. He encourages investors to be prepared to capitalize on any volatility that may arise.

Can Nifty Make a Comeback?

Despite the ongoing sell-off, SAMCO Securities highlights that Nifty is currently trading within an ascending curve channel that started from the June 2022 lows, which could offer support. Additionally, the 200-day moving average (DMA) is acting as a buffer for Nifty, and a recovery could be possible if the Relative Strength Index (RSI) shows improvement, signaling a potential technical bounce-back.

Related News

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• As markets slide further, Gaurang Shah suggests specific stocks to buy now.

What Should Investors Do Now?

According to Jayesh Sunder from Axis Mutual Fund, the current market presents a balanced risk-reward ratio. He advises investors to adopt a strategy based on their risk tolerance and investment goals. Should the market continue to dip, this could provide an opportunity to increase equity exposure.