Nifty 50 enters longest losing streak in two decades

The Nifty 50 index has experienced an eight-week losing streak, marking its longest decline in two decades. The index has fallen approximately 15% from its September 2024 peak, driven by sustained selling by foreign investors, rising US bond yields, increased interest rates, and surging crude oil prices. This downturn has made Dalal Street one of the worst-performing major markets globally, with the Indian rupee also seeing significant depreciation.

Despite the volatility, market experts suggest that the sell-off has reduced equity froth, bringing valuations closer to reasonable levels. The Nifty is currently trading at 17-18 times one-year forward earnings, down from 23-24 times in 2024. Blue-chip stocks such as HDFC Bank and Tata Consultancy Services are trading below their 10-year median valuation multiples.

As a result of the market correction, Systematic Investment Plan (SIP) returns have also entered negative territory. While SIPs utilize cost-averaging to mitigate volatility, they do not act as a hedge against broad market declines. Financial analysts advise investors to distinguish between market-wide volatility and fund underperformance, suggesting that stopping investments during a downturn may lock in losses by preventing the accumulation of units at lower prices.