BS EDIT: India’s stock markets turn bearish

Markets in decline

• Nifty fell 2.7 per cent, NSE500 dropped 4.7 per cent last week

• Midcaps and smallcaps fell 7.4 per cent and 9.6 per cent, respectively

• Only 47 of 500 NSE stocks gained

One-year returns remain weak

• Nifty up 4.6 per cent, underperforming inflation

• NSE500 up 2.9 per cent, midcaps up 2.5 per cent

• Smallcaps down 3.3 per cent, with smallcap 100 plunging 21.6 per cent

Key reasons for the selloff

• FPIs sold Rs 1 trillion in equities since January

• Rupee hit Rs 87.99 per dollar before a minor recovery

• Weak Q3FY25 results and cautious management outlooks

Budget & RBI policy – Limited relief

• Budget lacks major stimulus; infra spending may slow

• RBI’s rate cut may not revive investor confidence

Global headwinds & retail sentiment

• Weak demand in the EU and uncertainty over US tariffs

• Mutual funds see inflows, but smallcap selloff signals retail caution

Valuation concerns & the road ahead

• Nifty’s PE at 21 remains high

• Midcaps and smallcaps trade at 28 and 34 PE—unsustainable without earnings growth

• Further corrections could test retail investor confidence