IS THIS CORRECTION OVER OR IS THERE MORE TO COME?
The moment the markets start falling, one of the first questions you encounter is; whether it is the end of the rally. The current rally has been going on since the start of 2023, so some amount of cooling was called for. The Nifty and the Sensex peaked out in September 2024 and has since been under pressure. Incidentally, that is also the period when the FPIs turned net sellers with a vengeance and the Indian rupee also came under pressure. The rupee weakness and the Nifty weakness, in a sense, have played on each other.
It is hard to say, if the correction is done and dusted, but one can argue that most risks are already in the price. For instance, the US elections are over, Trump approach on tariffs is evolving, central bank policy looks stable, geopolitical risks in the Middle East & West Asia are waning and oil is not such a big macro challenge. India still has to address challenges like valuations, urban consumption, profit growth, and input costs; but these are largely internal challenges that can addressed with internal policies. First, the colour of the market fall!
HOW BAD HAS BEEN THE FALL IN THE MARKET?
When we talk about the fall in markets, our evaluation is normally restricted to the Nifty and the Sensex. However, these are generic averages and hardly give out the real picture. The table below captures the extent to which the key indices have fallen from their peak.
NSE Index | Current Value # | Peak Value | Fall from Peak |
NIFTY HEALTHCARE INDEX | 14,113.50 | 15,108.80 | -6.59% |
NIFTY IT | 42,590.70 | 46,088.90 | -7.59% |
NIFTY BANK | 48,724.40 | 54,467.35 | -10.54% |
NIFTY 50 | 23,155.35 | 26,277.35 | -11.88% |
NIFTY PRIVATE BANK | 23,965.95 | 27,280.60 | -12.15% |
NIFTY MICROCAP 250 | 23,136.35 | 26,476.90 | -12.62% |
NIFTY MIDCAP 100 | 53,113.50 | 60,925.95 | -12.82% |
NIFTY TOTAL MARKET | 12,064.65 | 13,842.60 | -12.84% |
NIFTY SMALLCAP 100 | 17,172.55 | 19,716.20 | -12.90% |
NIFTY CONSUMER DURABLES | 37,752.35 | 44,426.55 | -15.02% |
NIFTY FMCG | 55,596.05 | 66,438.70 | -16.32% |
NIFTY INDIA CONSUMPTION | 10,840.05 | 13,057.60 | -16.98% |
NIFTY MNC | 27,164.80 | 32,841.15 | -17.28% |
NIFTY METAL | 8,470.25 | 10,322.05 | -17.94% |
NIFTY COMMODITIES | 8,018.05 | 9,896.35 | -18.98% |
NIFTY NEXT 50 | 62,865.60 | 77,918.00 | -19.32% |
NIFTY AUTO | 22,274.35 | 27,696.10 | -19.58% |
NIFTY OIL & GAS | 10,757.00 | 13,607.20 | -20.95% |
NIFTY CPSE | 5,992.55 | 7,661.90 | -21.79% |
NIFTY PSU BANK | 6,244.60 | 8,053.30 | -22.46% |
NIFTY REALTY | 865.05 | 1,157.35 | -25.26% |
NIFTY INDIA DEFENCE | 6,134.80 | 8,302.05 | -26.10% |
Data Source: NSE (# closing value on 21-Jan 2025)
Here are some quick readings from the data sheet above.
While domestic investors have seen a sharp fall from the peak, the fall has been much sharper for the global investors. Here is why.
WHY THE FALL HAS BEEN HARDER FOR GLOBAL INVESTORS
For the global investors, the biggest challenge is to earn positive returns in dollar terms. For instance, if they earn 12% on the Nifty portfolio, and if the rupee has hardened against the US dollar by 2%, then the effective dollar returns for the global investor would be around 14%. However, the tables fully turn when both work against them, as has been the case in the current market scenario.
Let us look at global investor returns from India since September 2024 on the Nifty. Between late September 2024 and January 2025, the USDINR has gone from ₹83.5/$ to ₹86.5/$. That is an approximate rupee depreciation of -3.6%. The Nifty has fallen -11.88% from the peak levels in late September. To that, if you add the -3.6% depreciation in the rupee against the dollar, then in dollar terms, the global investors like the FPIs are actually down -15.48% from their peak portfolio values. That explains why FPIs are in a hurry to sell!
Related Tags
Invest wise with Expert advice
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Capital Services Support WhatsApp Number
+91 9892691696
IIFL Securities Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.