Markets may fall another 5-7 per cent, say experts

Last week, the Sensex fell over 2.20% to settle at 77,379 while the Nifty plummeted 2.49% to close at 23,440.
Markets may fall another 5-7 per cent, say experts
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NEW DELHI: India’s equity market may fall another 5-7% due to existing headwinds that have brought down the benchmarks- BSE Sensex and NSE Nifty 50- by about 10% from their all-time high levels.

Last week, the Sensex fell over 2.20% to settle at 77,379 while the Nifty plummeted 2.49% to close at 23,440.

“In the next three weeks, we have material events including the Union Budget announcement - until then, we are likely to see a 5-7% correction in the markets. A weak Budget parallel to the 2024 August budget could shock the markets. No mention of railways, infra, and defence will result in valuations of these sectors dropping to 30-40x levels,” said Sreeram Ramdas- Vice President at Green Portfolio PMS.

According to Ramdas, the weakness in preliminary banking stats, sanctions on Russian oil by the US and uncertainty of US President-elect Donald Trump’s attitude towards India are short-term negative sentiments driving the market. He added that clarity on Trump’s tariffs on China and approach towards Indian exporters, once he takes over the chair, will provide a state of certainty to the markets.

“We expect the market to recover post the Union Budget presuming it’s a growth capex titled budget,” said Ramdas.

In addition to these factors, the ‘expensive’ Indian market is hit by a slowdown in economic growth, continuous fall in rupee and corporate earnings failing to justify valuations.

These headwinds have led to an exodus of foreign institutional investors (FIIs) from the local market who now prefer safe avenues such as US treasury yields. So far in the calendar year 2025, FIIs offloaded (net sales) shares worth R 22,194 crore. Yashovardhan Khemka, Senior Manager - Research & Analytics at Abans Holdings said that as we enter the earnings season amid policy uncertainty, a strengthening dollar, and low GDP forecasts, selling pressure continues. “While a 5-10% correction in benchmarks seem unlikely, a 3-4% dip appears probable given the prevailing market weakness,” added Khemka.

Khemka believes that market recovery is expected once Trump’s policies become clearer, likely 1-2 weeks after his inauguration as President on January 20.

“First, these policies are inflationary, thus delaying interest rate cuts, thereby making US businesses more attractive to global investors. Additionally, the resulting strength of the US dollar is prompting FIIs to take profits in developing economies like India, as dollar-adjusted returns appear less favourable.

Second, Trump’s proposed tariffs on US imports could negatively impact Indian companies reliant on the US market, further impacting their future business forecasts,” said Khemka.

Gaurav Bissa, VP, InCred Equities said that a weak banknifty has made things worse for the bulls who are left stranded after nifty and banknifty closed below their respective 200dema levels. “Going forward, 23260 (for Nifty) is likely to be a key support for the benchmark index. This was the previous swing low and if this will be sustained, the oversold momentum indicators on lower timeframes will ensure a bounce to 24000-24200 is seen in the next few days,” added Bissa.

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