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Is Nifty entering the bear phase? On Monday, Indian stock markets witnessed a substantial decline as the Sensex fell by approximately 4,000 points, dropping below 71,500, whilst the Nifty experienced a steep 4% decrease, reaching 21,744.
And it’s all thanks to the Wall Street crash and its global market reaction! The current Indian stock market crash reflects the serious concerns in US markets, where recession fears are causing investor anxiety. JPMorgan has increased its recession probability forecast to 60%, following US President Donald Trump’s announcement regarding reciprocal tariffs, which the bank considers the most significant US tax increase since 1968.
The US markets are showing severe stress, with the Nasdaq now in bear territory, having declined approximately 23% from its December peak. The Dow Jones has also declined significantly, showing a 15% reduction. Following this international trend, the Nifty50 has decreased nearly 17% from its September high, approaching the bear market threshold of 21,022, according to an ET report.
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Although India faces relatively milder direct impacts from Trump’s tariffs, Dalal Street remains vulnerable to these global market movements, with clear indicators of market stress becoming apparent.
Anand James, Chief Market Strategist at Geojit Financial Services, contemplates the possibility of a situation comparable to the Covid period, characterised by rapid and substantial market losses.
“In such a scenario, we could see 20,200-19,800 as the initial downside objective. However, unlike the months that led to Covid breakdown, which saw a sustained period of sideways trade that hinted at exhaustion, we are now six months and 13% away from the peak during which period there were multiple and sizable swings on either side. This suggests that going forward, correction could be largely in the form of time, rather than price,” James told ETMarkets.
Also Read | Top 5 reasons Indian stock markets are in a free fall
The Dollar Index has declined as markets react to the inflationary impact of Trump’s tariffs. The 10-year Treasury yields have dropped under 4%, whilst Brent crude prices fell to approximately $66 per barrel in the previous week. These three factors – declining dollar, reduced yields, and lower oil prices – would typically create favourable conditions for India, resulting in reduced import costs, lower inflation, and increased foreign investment in stocks.
A senior fund manager at a global asset firm stated, “None of it applies this time. When the fear of recession grips, even the sweetest macros get bitter. Investors flee to safety across asset classes. And India, like always, is part of the global risk-off trade.”
Market expert Ajay Bagga offered a cautionary note. “We made the same mistake in 2008, and again in 2013—saying India is decoupled. When the risk-off happens, people start looking at pockets of liquidity and our exits are very large. We provide good exits to anybody wanting to take out money.”
Despite global concerns, India’s economic indicators remain robust: inflation is relatively stable, the rupee maintains steadiness, and corporate performance – particularly in domestic-focused sectors – remains resilient. This stability prompts some analysts to advocate for strategic adjustment rather than panic.
Jitendra Gohil, Chief Investment Strategist at Kotak Alternate Asset Managers, advised: “Our think tank advises reducing portfolio beta. Reallocate towards domestic-focused sectors like banking and financials. With the dollar softening and oil prices correcting, India could show near-term outperformance. But lower your return expectations and diversify.”
Also Read | Samir Arora warns! Biggest risk to Indian stock markets not Donald Trump’s tariffs but…
Nevertheless, significant uncertainties persist.
Jerome Powell, the US Federal Reserve Chair, delivered a concerning message about the prolonged battle against inflation, attributing part of the challenge to Trump’s tariff policies. Should US inflation remain stubborn, the anticipated interest rate reductions—which currently support equity values—might need significant reassessment.
Will Nifty now enter the bear territory like the Nasdaq?
The possibility is increasing, though not certain, says the ET analysis. While India continues to demonstrate economic strength, a significant global investor retreat from risk assets could impact all markets, regardless of their individual merits.
Currently, India’s markets show mild distress. However, if the situation in Wall Street deteriorates further, Dalal Street could experience heightened volatility and pressure.
Also Read | Donald Trump administration revises reciprocal tariffs for 14 countries including India – check full list
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