Stock Market Crash: Nifty Falls Over 12%, Experts Say It’s Normal but What’s Next?

resr 5paisa Research Team

Last Updated: 12th February 2025 - 02:40 pm

2 min read

The Indian stock market has been on a downward spiral, leaving investors uncertain about the road ahead. The Nifty50, which touched a record high of 26,277 on September 27, 2024, has fallen over 12% to 23,071 as of February 11, 2025. While this sharp decline has caused concern, market expert Jyotivardhan Jaipuria reassures investors that such corrections are historically normal and part of long-term market cycles.

Historical Perspective: Market Corrections Are Common

Stock market corrections—defined as declines of 10% or more from recent highs—have been a recurring phenomenon. Historical data from the past 25 years shows that market dips of this magnitude are not unusual and often provide buying opportunities for long-term investors.

Jaipuria highlights that sharp corrections are typically followed by strong recoveries as market fundamentals realign. He points out that while the short-term outlook may be uncertain, historical trends suggest that markets tend to bounce back within 6 to 12 months after a major correction.

Why Is the Market Falling?

Several factors have contributed to the recent market decline:

Global Economic Concerns

Geopolitical tensions and trade wars, including US President Donald Trump’s tariffs on steel and aluminum, have increased market uncertainty. Global growth forecasts have been revised lower, adding to investor anxiety.

Domestic Market Factors

Weak corporate earnings have failed to meet market expectations, leading to selling pressure across sectors.
Foreign Institutional Investors (FIIs) have been net sellers, withdrawing ₹12,643 crore from Indian equities in February alone.

Small and Midcap Stock Pressure

The broader market, including small-cap and mid-cap stocks, has witnessed deeper corrections, with some stocks falling over 20% from their peaks.
Concerns over high valuations in these segments have triggered profit-booking.

Investor Sentiment: Cautious Yet Hopeful

Investor sentiment remains mixed, with many adopting a wait-and-watch approach. While panic selling has been evident in certain sectors, seasoned investors view this as an opportunity to buy quality stocks at lower valuations.

What Should Investors Do Now?

  • Avoid Panic Selling: Market corrections are normal, and long-term investors should stay focused on their investment goals.
  • Rebalance Portfolios: Shift allocations toward large-cap stocks and defensive sectors like pharma and IT, which have shown resilience.
  • Look for Buying Opportunities: Historically, market corrections have been excellent entry points for fundamentally strong stocks.
  • Keep an Eye on Interest Rates: The US Federal Reserve and RBI’s future policies on interest rates will significantly impact market movement.

Conclusion

While the market’s 12% drop is unsettling, historical data suggests that such corrections are part of the normal market cycle. Experts believe that once earnings improve and FIIs return, the market will stabilize and regain momentum. Investors should stay disciplined, focus on quality stocks, and avoid emotional decision-making. As past trends indicate, those who remain patient during downturns often reap the benefits of the next market rally.

Source: Economic Times

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