Sensex and Nifty 50 Indices Look For Support After Tough Start to 2025

The Indian stock markets have been facing some bearish pressure over the past five months, with major indices such as the Sensex and Nifty 50 entering correction territory since September's highs. To be in a ‘correction', the index needs to be more than 10% down, which unfortunately for bulls, both indices are beyond.

Several factors have contributed to this downward trend, which is expected to continue until foreign institutional investors (FIIs) change their stance and show increasing confidence in the market.

The Nifty50 index has fallen more than 14%, whilst the Sensex is more than 13% from it's peak. Both indices are now entering a range that could act as support, having previously acted as resistance early last year.

One of the driving forces behind the market pressure is the attractiveness of the US market, and re-emergence of China as a place to invest. For the US, the strength of the US dollar, coupled with higher US bond yields, has drawn investors away from emerging markets like India. The US dollar index is nearing historic highs, further solidifying this trend.

Chinese stocks are also seeing an increased interest both home and abroad, with the Hang Seng Index having gained more than 30% since September, and the SSE index up more than 22% over the same time period. Perceived investibility of China has a knock on effect in capturing global investors' interest, and pulling it away from other emerging markets. There remains a perceived undervaluation compared to Indian stocks, with the trend having gone the other way in recent years when investors moved away from China.

Uncertainty has also been heightened by global trade policies, particularly those from the US. Investor sentiment has been negatively impacted by potential tariff policies from the Trump administration. Notably, a 25% tariff on automobiles, semiconductors, and pharmaceuticals was announced, affecting related industries in India.