Signs from the storm on Dalal Street

How bad is it? Is it different this time? Is it wise to invest? Answering the biggest questions haunting your sleep

- Mayur Bhalerao & Niti Kiran

MUMBAI: India's share markets are reeling from a significant sell-off, just completing a disastrous week and the fifth straight month of free fall. The decline is fuelled by global headwinds and a palpable sense of investor panic. While the Indian economy saw a rebound in the December quarter, it's still the second-slowest growth in two years. Could the growth recovery be fragile? Will foreign investors return? Should newbie investors stay put? Above all, is this a temporary dip, or the start of a prolonged bear market?

To address investors' lingering concerns over this confluence of domestic and international pressures, Mint spoke with market experts to find out whether to expect the markets to regain their mojo or to pack for a long winter.

The breadth and depth of it: How deep and widespread is the current correction, and how long could it last?

A widespread market downturn has gripped Indian equities, with the Sensex plummeting 14.5% from its 52-week high and shedding nearly 3% in the last week alone. The damage extends beyond bluechips: the BSE Midcap 150 and Smallcap 250 indices have fallen by 22% and 24%, respectively, from their most recent highs (see chart 1). Small- and mid-cap stocks endured a brutal week, with declines exceeding 4%, a clear sign of heightened investor aversion to risk and potential for continued downward pressure. The market breadth (the advances-to-declines ratio of stocks) worsened further.

But the depth of correction differs by sector. "Stocks and sectors that attracted major flows in 2024 and have disappointed in their earnings are undergoing de-rating pain," said Siddharth Bhamre, head of research at Asit C. Mehta Investment Intermediates.

Purely looking at stock prices, Bhamre says this can qualify as a bear market, but there's more: 2024 was the year of excesses, and "now in hindsight, nobody can deny that this is course correction or 'mean reversion' in action".