Dalal Street bleeds: Sensex, Nifty in longest losing streak in two years as India’s market cap slips below $4 trillion

The bear grip on Dalal Street appears to tighten with each passing day, as both benchmark indices, BSE Sensex and NSE Nifty, extend their losing streak for the eighth consecutive session, marking the first such occurrence in two years. The 30-share Sensex has slumped 2,644 points over the past eight sessions to reach 75,939, while the Nifty50 has plunged 810 points to 22,929. A strong wave of sell-offs, driven by aggressive offloading by foreign portfolio investors (FPIs), has dragged the combined market capitalisation of BSE-listed companies below the $4 trillion mark for the first time in over 14 months.

The market cap fell to $3.99 trillion—the lowest since December 4, 2023—during intraday trade on February 14, eroding investors’ wealth by over $1 trillion from its mid-December peak of $5.14 trillion. However, by the close of trade on Friday, the market recovered some lost ground, with the total market cap standing at $4.6 trillion.

During Valentine’s Week (February 10-14), the BSE benchmark Sensex lost 1,921 points, or 2.46%, while the NSE Nifty50 declined 630 points, or 2.7%, over the same period. This marked the largest weekly loss in two months, with BSE-listed companies shedding nearly ₹26 lakh crore in market value.

Broader markets were the worst hit, as midcaps and smallcaps sharply underperformed largecaps. The BSE Midcap and Smallcap indices plummeted 6.9% and 8.1%, respectively, over the past week as risk-off sentiment returned to the markets. Across sectors, all indices ended in negative territory, with capital goods (-6.3%), auto (-6.7%), realty (-10%), metal (-4.9%), and power (-7.3%) emerging as the worst performers.

Key factors behind the market sell-off

Throughout the week, Indian equities continued their downward trend amid sustained foreign fund outflows, a weakening rupee, the U.S. government's reciprocal tariff plans, subdued domestic growth, and lacklustre management commentary during the Q3 earnings season.

Rupee hits record low on strong dollar demand

On Monday, the rupee slipped to an all-time low of 87.95 against the dollar before regaining some ground later in the week, following intervention by the Reserve Bank of India (RBI), which sold U.S. dollars in the spot market. In 2025, the Indian rupee has depreciated nearly 1.5% against the dollar, making it the second-worst-performing Asian currency after the Indonesian rupiah.

The rupee has remained under pressure due to sluggish domestic economic growth, a recent interest rate cut by the RBI, rising U.S. bond yields, and a stronger dollar—factors that have led to capital outflows as foreign investors seek safer returns in developed markets.

FPI selling crosses $11 billion

Foreign portfolio investors (FPIs) have offloaded over $11 billion worth of Indian equities in just 32 trading sessions this year, marking the highest outflow ever recorded during this period. The FPI equity sell-off was the steepest among emerging markets, followed by Taiwan, which recorded net outflows of $2.5 billion in 2025.

FPI flows to date in February 2025 have been negative for all major emerging markets except Thailand. India, Brazil, Indonesia, Malaysia, the Philippines, South Korea, Taiwan, and Vietnam have seen outflows of $2,189 million, $21 million, $381 million, $59 million, $5 million, $276 million, $1,114 million, and $235 million, respectively. However, Thailand recorded inflows of $17 million, according to data compiled by Kotak Securities.

“The depreciation of the Indian rupee has further pressured foreign portfolio investments, leading to over $10 billion in outflows from Indian equities this year. Concerns over slowing economic growth, weak corporate earnings, and stretched valuations have fueled investor caution,” Bajaj Broking stated in a note.

Additionally, global macroeconomic uncertainties and fears of a potential tariff war under a possible second term for U.S. President Donald Trump have weighed on sentiment. Rising U.S. bond yields and a stronger dollar have also contributed to capital outflows, as foreign investors seek safer returns in developed markets, the report noted.

U.S. ‘reciprocal’ tariffs

Uncertainty over the U.S. government's ‘reciprocal’ tariff plans has left investors jittery, leading to sustained fund outflows by foreign investors. On Thursday, President Donald Trump unveiled a blueprint for imposing reciprocal tariffs on trading partners, though implementation has been postponed until April. Under the new plan, the U.S. will levy reciprocal tariffs on every country that imposes duties on American imports—a move that is likely to impact India significantly.

Trump announced the tariffs just hours before a scheduled meeting with Prime Minister Narendra Modi at the White House. During the meeting, the two leaders discussed trade relations, immigration, military sales, and nuclear technology, among other key issues. Prime Minister Modi stated that bilateral trade between the U.S. and India is expected to more than double to $500 billion by 2030, and both countries will work to quickly initiate a trade agreement.

Market in final phase of consolidation

Given the uncertainty surrounding Trump’s economic policies, high valuations, and mixed corporate earnings, the Indian stock market may witness further corrections in the short term. While the broader market is expected to remain under pressure, the resilience of large-cap stocks is a positive sign.

“We believe the market is now in the final phase of consolidation. With the broader market having corrected by 14%, the downside appears limited, supported by strong long-term economic fundamentals. India’s GDP growth is projected to rise from 6.4% in FY25 to 7.0% in FY26. If earnings growth returns to the long-term average of 15% in FY26, we can expect the market to recover from its negative trend,” said Vinod Nair, Head of Research at Geojit Financial Services.

Vipul Bhowar, Senior Director - Listed Investments at Waterfield Advisors, noted that prevailing high valuations in the Indian stock market have contributed to investor caution. “With prices soaring, many investors are reassessing their positions, hesitant to enter a market that appears overheated and potentially risky. This combination of factors creates a complex landscape where once-strong interest in Indian equities is now tempered by hesitation and caution,” he added.