Global trade tensions & weak earnings continue to shake investor confidence
The Indian stock market witnessed a sharp decline on Wednesday, February 12, 2025, as the benchmark indices BSE Sensex and Nifty50 traded deep in the red. Amid mixed global cues, domestic economic concerns, and ongoing sell-offs in key sectors, investor sentiment remained cautious. The continuous downtrend over the past few weeks has led to a significant number of stocks falling below their 200-day moving average (DMA), indicating a bearish phase for the broader market.
Market Performance Overview
At the time of writing, the BSE Sensex was trading at 75,486.29 points, down 807.31 points or 1.06%, while the Nifty50 stood at 23,834.15 points, registering a 237.65-point decline or 1.03%. The market weakness was evident across large-cap, mid-cap, and small-cap stocks, leading to a broad-based sell-off.
The broader market slump has impacted investor portfolios, with approximately 81% of the stocks in the Nifty 500 index trading below their 200-DMA. A stock or index trading below the 200-DMA is typically seen as being in a bearish trend, whereas trading above it indicates a bullish outlook.
Key Factors Behind the Market Decline
1. Global Trade Tensions
The ongoing global trade uncertainties have impacted equity markets worldwide. The recent announcement of 25% tariffs on steel and aluminum imports by the United States has triggered concerns about a potential trade war. This move has particularly affected Asian markets, including India, as steel and metal stocks faced heavy selling pressure. Investors fear that higher tariffs could impact exports, reducing profitability for Indian companies in the steel and infrastructure sectors.
2. Domestic Economic Concerns
The focus of investors has also shifted to India’s inflation data, which is expected to decline to a five-month low of 4.6% for January 2025. Slower food price inflation has been the primary driver of this drop. While lower inflation can be positive for consumer spending, it also influences monetary policy decisions. The Reserve Bank of India (RBI) may use this data to adjust interest rates, which could impact credit growth and liquidity in the stock market.
3. Corporate Earnings Weakness
Earnings season has revealed disappointing results for several companies, contributing to the negative sentiment. Vodafone Idea reported a net loss of ₹6,609 crore for Q3, leading to a 6.5% decline in its stock price. Weak earnings performance across various sectors, including telecom, real estate, and energy, has dampened confidence among institutional and retail investors.
Sectoral and Stock-Specific Movements
The market sell-off has impacted multiple sectors, with some of the biggest names hitting 52-week lows.
1. Heavyweight Stocks Take a Hit
Key Sensex constituents such as Reliance Industries, Asian Paints, Power Grid Corporation, and Tata Motors fell sharply during intra-day trading. These stocks, considered market bellwethers, reaching 52-week lows is a sign of weak overall market sentiment.
2. Banking and Financial Stocks Under Pressure
In the BSE 100 index, major banking and financial stocks such as Coal India, Canara Bank, and Jio Financial Services witnessed declines. DLF, GAIL (India), Hero MotoCorp, Indian Oil Corporation, and REC also hit their 52-week lows. Several of these stocks dropped by up to 5% in intra-day trade, reflecting selling pressure in financial and energy sectors.
3. Mid-Cap and Small-Cap Stocks Enter Bearish Territory
The mid-cap and small-cap indices have also been under pressure, with mid-caps falling over 18.6% from all-time highs, while small-caps have entered bear market territory, having declined over 20% from their December 2024 peaks. The sharp fall in broader markets has raised concerns about liquidity, as retail and domestic investors pull out funds in fear of further losses.
Global Market Trends Impacting Indian Stocks
Indian equities have also been reacting to global market trends, as major international indices continue to show volatility.
Japanese and South Korean Markets: Stock markets in Japan and South Korea have seen mixed movements, as investors evaluate the impact of higher U.S. tariffs on exports.
Hong Kong Tech Rally: The Hang Seng Tech Index entered a bull market, rising 25% from January lows, led by Chinese AI firms such as DeepSeek. However, this rally failed to boost Indian tech stocks, which faced selling pressure.
U.S. Market Outlook: Investors globally are watching the U.S. Federal Reserve’s policies closely, as interest rate decisions could influence capital flows into emerging markets like India.
Investor Sentiment and Future Market Outlook
With a combination of weak domestic sentiment and global uncertainty, the Indian stock market remains highly volatile. Investors are currently cautious, waiting for inflation data, monetary policy updates, and earnings results to gain further clarity on market direction.
Key Levels to Watch in Sensex and Nifty
Sensex Resistance: 76,200 – A breakout above this level could signal renewed buying interest.
Sensex Support: 74,800 – A break below this level could lead to further declines.
Nifty Resistance: 24,000 – Bulls will look for a move above this mark to regain control.
Nifty Support: 23,700 – If breached, markets could see a deeper correction.
Investment Strategies Amid Volatility
With markets currently in a corrective phase, analysts recommend diversification and selective investing:
Defensive Sectors: Stocks in pharmaceuticals, FMCG, and utilities may provide relative stability.
Avoiding Overleveraged Stocks: Companies with high debt and weak earnings visibility should be approached cautiously.
Long-Term Perspective: Market corrections offer opportunities for long-term investors to accumulate quality stocks at discounted valuations.
What Lies Ahead for the Market?
The sharp decline in Sensex and Nifty50 on February 12, 2025, underscores the fragile investor sentiment amid global trade worries, weak earnings, and economic data uncertainty. The market’s downward trajectory, with over 80% of stocks trading below their 200-day moving averages, suggests that caution should prevail in the short term.
While short-term volatility remains, experienced investors may see this as an opportunity to accumulate fundamentally strong stocks at lower valuations. The market’s future direction will depend on upcoming inflation data, Federal Reserve policy decisions, and global economic developments.
Until greater clarity emerges, investors should adopt a disciplined approach, focusing on risk management and long-term wealth creation strategies.
