Nifty’s Big Fall: Simple to Understand

MUMBAI, India — The Nifty 50 index, a bellwether of India's stock market, experienced its longest monthly losing streak in 29 years in February 2025, falling for five months in a row. The slump had wiped out more than Rs 90 lakh crore of investor wealth since September 2024. Foreign funds exited, weak earnings knocked dust, and global concerns aggravated the crash.

A Rough Ride for Investors

The Nifty had reached its all-time high of 26,277.35 as of September 27, 2024. It has since fallen roughly 15 percent, ending at 22,124.70 on Feb. 28, 2025. That’s a decline of 4,152 points. Another big index, the Sensex, also tanked, dropping 1,400 points on the last day of trading in February alone. Investors witnessed Rs 9 lakh crore go up in a single session. Foreign institutional investors (FIIs) sold $25 billion worth of Indian stocks since September, with $4.1 billion leaving Indian shores in February. Analysts cite U.S. economic uncertainty and a stronger Chinese market as factors draining cash.

Small Stocks Hit Hardest

Small-cap and mid-cap stocks got the hardest hits. The Nifty Small-Cap 100 lost 13.2% in February, and is now down 26% from its peak last year. The Nifty Mid-Cap 100 fell 11.3%, 22% below its peak. Investors moved to large cap stocks and balanced funds, looking for stability. “There will be selling pressure persisting in the small-caps and mid-caps,” Mahesh Patil, chief investment officer at Aditya Birla Sun Life Asset Management, said. Investors are going to ride it out — no big buying any time soon.” This pivot is the sign of a market spooked by further losses.

Why the Drop Happened

This trouble began after Nifty made an intermediate high in September. Disappointing third-quarter earnings from Indian companies disappointed traders. Global fears — such as U.S. tariff talks under President Donald Trump — reverberated through markets everywhere. The rupee slid, which made India less attractive. At the same time, China’s economy bounced back, siphoning off foreign outflows. FIIs pulled out more than Rs 2 lakh crore from Indian equities since October—around $20 billion. The Nifty’s five-month decline matches a rare streak between July and November 1996, when it declined 26%. Before that, there was a fall spanning eight months from 1994 to 1995 when the market crashed by 31.4%, but that was before Nifty was officially launched.

What’s Next for Nifty?

Analysts envision a bumpy road ahead but point to potential silver linings. Historically, March has been a good month for Indian stocks, in which many ended with gains. India’s Q3 FY25 GDP expanded 6.2%, exceeding some estimates, maybe boosting spirits. But experts say the bleeding may not be over anytime soon. Kotak Institutional Equities sees 2025 as a range-bound Nifty price of 19 times March 2026 earnings — 90% premium to emerging markets. They glance of risks to profit growth but suggest a recovery could yawn by later FY26 if liquidity improves. Traders, for their part, are watching 22,000 as a key support level. A breakdown would spell further trouble, with a target of 21,500.

This crash has rocked Dalal Street, the home of India’s financial hub. Investors are skittish, wondering whether this is the bottom or merely a breather. Others view this as an opportunity to buy low, particularly in large-caps. Others are afraid of deeper cuts if foreign outflows don’t ease. The market has a lot riding on global cues, local earnings and whether domestic buyers will offset the sales by FIIs. Stability may eventually return, but not fast. Investors should brace themselves — and keep their powder dry for bargains.

Nifty’s Big Fall: Simple to Understand

A Rough Ride for Investors

Small Stocks Hit Hardest

Why the Drop Happened

What’s Next for Nifty?

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