Indian stock markets have plunged, wiping out nearly Rs 83 lakh crore in investor wealth. With FIIs pulling out funds and global uncertainties rising, retail investors face a tough choice – exit now or stay invested ?
The Indian stock markets are experiencing one of their steepest declines in recent history, erasing nearly Rs 83 lakh crore in investor wealth. The Sensex and Nifty have been on a sharp downward trajectory since June 2024, with the past month witnessing an especially brutal fall. This turmoil has left retail investors facing a difficult dilemma -should they stay invested and ride out the storm, or should they cut their losses and exit before things worsen?
The biggest blow to the markets came from renewed global trade tensions. The US, under Trump’s leadership, has reintroduced hefty tariffs on imports from several economies, including China. This move has triggered concerns of a global economic slowdown, affecting investor sentiment worldwide. With the possibility of a trade war looming, foreign institutional investors (FIIs) began withdrawing their funds from emerging markets like India.
FIIs have withdrawn a staggering Rs 2.1 lakh crore from Indian equities, causing heavy selling pressure. Domestic economic concerns, including high inflation, sluggish GDP growth, and weak corporate earnings, have further dampened investor confidence. As a result, stock prices across most sectors have been plunging, leading to panic selling among retail investors.
The Scale of the Fall: The recent market rout has been severe, with small and mid-cap stocks suffering the most. In February alone, these indices saw a steep 13% decline, and analysts warn that further downside is possible. The Nifty 50, which once hovered near record highs, is now trading at its lowest levels in months. The Sensex has followed a similar trajectory, witnessing sharp corrections.
Most sectoral indices are deep in the red, with IT, real estate, and auto stocks facing the brunt of the sell-off. The only exception has been PSU banks, which have shown relative resilience due to improved earnings and government support. However, with volatility gripping the market, even these stocks may not remain immune to further corrections.
Will the Market Recover: Stock markets operate in cycles, and downturns are an inevitable part of investing. While the current situation looks grim, markets have historically bounced back stronger after every major crash. The speed of recovery, however, depends on multiple factors, including global trade policies, FII activity, and domestic economic stability. With India’s strong economic fundamentals and ongoing policy reforms, the long-term growth story remains intact. The current turbulence may present an opportunity for patient investors to accumulate quality stocks at lower valuations.
What Should Investors Do: Market crashes can be unsettling, especially for small investors who lack the financial cushion that large institutions enjoy. The temptation to exit during a downturn is high, but history has shown that panic selling often leads to regret when markets eventually recover. The key to surviving such turbulent times lies in adopting a well-thought-out strategy. In such a scenario, investors must first review their portfolios and assess their exposure to high-risk stocks.
Those invested in fundamentally strong companies with solid earnings and growth prospects should consider holding their positions instead of selling at a loss. For those heavily invested in speculative stocks, rebalancing and shifting towards safer assets may be a wiser approach. Investors with a long-term horizon should continue their SIPs and avoid making impulsive decisions. History has proven that disciplined investors who stick to their strategies tend to benefit when markets stabilize and rebound. Investing is a long game, and those who remain disciplined are often the ones who reap the biggest rewards.
The writer is a senior journalist and columnist. Views are personal. www.narvijay.in
