A violent selloff slams India’s stock market, with some of its most valuable equities falling 71% from their highs. Whether it’s the shadow of Donald Trump’s tariff threats, a scary warning from India’s top contrarian investor S Naren, or an earnings-valuation mismatch finally catching up, the carnage is uncompromising.
As high-net-worth individuals and family offices join overseas investors in the selling frenzy, regular investors become increasingly impatient. The unrelenting migration of global money, fueled by Trump’s America First campaign, has seen foreign institutional investors (FIIs) withdraw billions, pushing mutual funds to reevaluate their once-reliable strategy of buying every downturn. However, when liquidity dries up, the safety net begins to disintegrate.
The route is indiscriminate, affecting both blue-chip and small-cap companies. Out of 528 stocks having a market value of at least $1 billion (₹8,700 crore), 412 have fallen at least 20% from their peak. At least 19 of them have experienced significant losses, ranging from 50% to 71% of their value.
Even India’s most valued firm, Reliance Industries, has not been spared. The stock fell to a 52-week low on Wednesday and has lost a fourth of its value during this sell-off. Investors who banked on India’s bull run to outperform global headwinds have paid the price. According to Kotak Institutional Equities, ordinary investors’ activity in the coming weeks or months will influence the direction of the Indian market.
“Our data reveals that retail investors’ returns have been much lower than those of SMID indexes – retail investors invested more funds at higher market levels. Could the ‘breaking’ threshold for investors be much closer than is widely assumed?” asked Kotak’s Sanjeev Prasad. He stated that ordinary investors’ price-agnostic investment behavior and their ongoing purchases of equities directly and indirectly through domestic institutions had resulted in market overvaluation over the previous 9-12 months, preventing a more significant and faster correction.
Analysts believe that investors may take advantage of the market’s present dip to shift from mid and small caps, which are still overpriced, to properly valued large-caps.”The market is in oversold territory, and a pullback is expected, but because FIIs are likely to sell into a rally, the upside is limited,” said Geojit’s Dr. V K Vijayakumar. Ionic Wealth, which Angel One finances, has encouraged customers to focus on continuous staggered additions over the next two months, with the possibility of speeding if markets fall another 5%.”Corrections provide a chance to create long-term holdings. We advocate a neutral equity allocation, with 60% in big caps and the remainder in SMIDS. “On deployment, 50% can be deployed immediately, and the remainder can be staggered,” it stated.
