The Nifty50 index has just recorded an unprecedented 10-day losing streak—its longest since its official inception in April 1996—falling nearly 16% from its September 2024 peak of 26,277. This correction ranks as the sixth-largest drawdown since the 2008-09 financial crisis and the second-biggest since the Covid crash in March 2020.

Interestingly, the last time a 10-day losing streak occurred was between December 28, 1995, and January 10, 1996—just before Nifty's formal launch. This time, the selloff has been fueled by aggressive foreign institutional investor (FII) outflows, which have already surpassed $14 billion in 2025, amid global uncertainties including Donald Trump’s tariff threats and a depreciating rupee. Meanwhile, the Sensex has logged its fifth consecutive monthly decline, a rare event last seen in 1996.

Midcap and Smallcap Stocks Enter Bear Market

The market pain is even worse in broader indices, with the Nifty Next 50 nosediving nearly 25% from its highs. Meanwhile, midcap, smallcap, and microcap stocks have officially slipped into bear market territory, with several stocks losing over 50% of their value.

For retail investors, the meltdown in smaller stocks has been particularly harsh, wiping out billions in market capitalization.

Are Valuations Now Attractive?

The correction has dragged Nifty50’s price-to-earnings (PE) ratio below 20 for the first time since July 2022—a level seen only three times in the past five years:

1. During the Russia-Ukraine war in 2022
2. During the Covid crash in March 2020, when PE dropped to 17.15
3. Now, amid the ongoing FII-driven selloff

At its September 2024 peak, Nifty’s PE stood at 24.38, suggesting that valuations have significantly cooled off.

However, the correction is also linked to an earnings slowdown. According to Motilal Oswal, Nifty50’s PAT (profit after tax) growth in the first nine months of FY25 was just 4%, compared to the 20% CAGR seen during FY20-24. While analysts are still hopeful about FY26 earnings growth of 15% for Nifty50, downward revisions remain a risk.

Technical Indicators Signal a Possible Bottom

Amid the ongoing panic, some analysts believe that Nifty might be approaching a crucial support zone between 21,800 and 22,000—a level that has historically held firm, except during extreme market crashes like Covid.

Key Market Breadth Indicators:

• Only 7.6% of NSE 500 stocks are trading above their 50-day moving average
• Just 6.2% are above their 100-day moving average
• 10.1% remain above their 200-day moving average

These levels are comparable to those seen during the Covid crash, suggesting that a bottoming-out process may be underway.

"Periods of extreme fear and negative sentiment have often preceded strong market rebounds," noted Akshay Chinchalkar, Head of Research at Axis Securities. However, he advised investors to wait for confirmation signals before deploying fresh capital.

March: A Crucial Month for a Possible Market Rebound?

Historically, March has been a turnaround month for Indian markets, with Nifty delivering an average gain of 1.7% since 2009, barring the 2023 downturn. Interestingly, Nifty has never posted six consecutive months of losses, increasing hopes for a potential recovery.

Where Are the Opportunities Now?

Quant Mutual Fund believes that 60% of the current market correction has already played out, and investors may now find selective buying opportunities in:

• Infrastructure
• Hospitality
• Pharmaceuticals
• Retail
• Materials
• Telecom

Additionally, the Nifty 500 index, which represents 92% of NSE’s market cap, is signaling that a near-term bottom may be forming.

Investor Sentiment: Is the Worst Over?

While bullish catalysts remain unclear, many analysts believe the current extreme pessimism could be a precursor to a sustained recovery.

"Investors rarely catch the exact market top or bottom," Axis Securities stated. "But history shows that the best opportunities emerge when fear and negativity dominate market sentiment. That moment is now."

Market participants will now be closely watching:

• Macroeconomic data
• Corporate earnings
• FII flows
• Global risk sentiment

for any signs of stability and potential recovery.