The Indian Stock market has been on a steady decline for the past two months, almost down 10% from the peak it had formed in September 2024. Since the start of the year, Foreign institutional investors have almost sold shares worth 73,000 crores. What are the market sentiments, technical analysis, and expert opinion, and should there be any share market recovery insight?
Current Market Sentiment
The market has been on a downward hill throughout this month, with mid-cap and small-cap stocks suffering even sharper declines—7.29% and 10.57%, respectively. Analysts suggest that while it’s difficult to predict whether the worst is over, the current fall presents a good opportunity for long-term investors to pick fundamentally strong companies.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said about the market’s volatility: “This six-day week is likely to be highly volatile with major events like the Fed decision and the budget in India. If expectations for fiscal stimulus through income tax cuts are met in the budget, we could see a relief rally.” However, he cautioned that sustained recovery would require evidence of growth and earnings revival.
Technical Analysis
From a technical point of view, the Nifty50 index is approaching critical support levels around 22,600 points. There is a five-year rising trendline connecting lows from 2020 and 2023. Analysts believe that if this support holds, it could serve as a foundation for a potential rebound.
Some indicators suggest that the market is currently oversold. The Relative Strength Index (RSI) indicates oversold conditions, which may lead to a bounce-back if buying interest returns. However, traders should remain cautious as market sentiment can shift rapidly based on external factors.
Expert Insights
Dhiraj Relli, MD & CEO of HDFC Securities, advises investors to scale down their expectations for returns in 2025. He said that while there may be a short-term upside of about 10%, significant gains will depend on geopolitical stability and corporate earnings momentum. “A sustainable up move will require FPIs to turn positive on India,” he stated.
Varun Goel, Senior Fund Manager at Mirae Asset, maintains an optimistic outlook for India’s medium- to long-term prospects due to strong macroeconomic fundamentals and rising household incomes. “We are optimistic about sectors like banking & financial services, manufacturing, IT, pharmaceuticals, capital goods, and chemicals,” he explained.
FII and DII Trends
Recent data reveals that Foreign Institutional Investors (FIIs) have sold equities worth approximately ₹66,602 crore (around $8 billion) in January alone. This selling pressure has contributed to market volatility. In contrast, domestic institutional investors (DIIs) have net purchased equities totaling around ₹20,254 crore year-to-date, providing some support against FII outflows.
Sectoral Performance
1. Banking & Financial Services: Analysts remain positive due to reasonable valuations and higher return ratios.
2. Manufacturing: The government’s push for infrastructure development is expected to drive growth in this sector.
3. IT & Pharmaceuticals: With consistent earnings growth and sound fundamentals, these sectors are likely to attract investor interest.
When will the share market recover?
While predicting an exact timeline for recovery in the share market remains challenging due to various external factors and domestic uncertainties, there is cautious optimism among analysts regarding potential growth in the latter half of 2025. The upcoming Union Budget will play a crucial role in shaping market sentiment.
Investors are encouraged to adopt a long-term perspective while remaining fully aware of market fluctuations. As V K Vijayakumar says, “We need data indicating growth and earnings revival” for any sustained rally to occur.