Stock market crash: Nifty logs longest monthly losing streak in 29 years; What should be your trading strategy?

Stock market crash: India’s domestic equity benchmarks, Sensex and Nifty 50, logged their worst day in around five months on Friday, February 28, with the NSE benchmark posting its longest monthly losing streak in the last 29 years (since 1996), dragged by foreign capital outflows amid US tariff fears. 

The 30-share BSE benchmark Sensex tanked 1,414.33 points or 1.90 per cent to settle at 73,198.10. During the day, it crashed 1,471.16 points or 1.97 per cent to 73,141.27. Extending losses to the eighth straight day, Nifty dropped 420.35 points or 1.86 per cent to 22,124.70. The indices are down six per cent for the month.

Also Read: Nifty 50, Sensex suffer biggest intraday drop of 2025; IT stocks hit hard—10 key highlights

Stock market crash: Sensex, Nifty down 15-16% from peak

The BSE benchmark, which hit a record peak of 85,978.25 on September 27 last year, has given up 12,780.15 points, or 14.86 per cent from the peak. The Nifty has crashed 4,152.65 points, or 15.80 per cent, from its lifetime high of 26,277.35 on September 27, 2024. Investors’ wealth plunged by ₹9 lakh crore on Friday, with the crash in Indian equities and rupee’s weakness.

The broader and more domestically focussed mid-cap index confirmed a bear market, falling more than 20 per cent from its September 24 record close, pressured by poor earnings, lofty valuations, looming US tariff concerns and persistent foreign outflows. The small-cap index had confirmed the trend earlier.

In February, the mid-cap and small-cap indexes declined 11 per cent and 13 per cent, respectively, their worst monthly performance since the COVID-19 pandemic-induced selling in March 2020. Additionally, the Indian rupee depreciated 19 paise to close at 87.37 against the US dollar on Friday.

Following the sharp decline in equities, the market capitalisation of BSE-listed firms eroded by ₹9,08,798.67 crore to ₹3,84,01,411.86 crore ($4.39 trillion) on Friday. Their market cap has eroded by ₹93.91 lakh crore from last year September’s record high of ₹4,77,93,022.68 crore.

Also Read: Nifty down 16% from peak; is Indian stock market oversold? Which sectors may lead next leg of rally? Experts weigh in

All 13 major sub-indexes fell for the month, with realty and information technology stocks leading the losses. The IT index slumped 4.2 per cent on Friday, leading losses on the benchmark index after weak US labour market data added to worries of a potential slowdown in the world’s largest economy may be slowing.

What should be your trading strategy?

According to Ajit Mishra, SVP, Research, Religare Broking Ltd, the new expiry series began on a weak note. Markets slipped nearly two per cent, weighed down by weak global cues. The bearish sentiment was evident from the start intensified as the session progressed, pushing Nifty to close near the day’s low. 

According to Mishra, uncertainty often weighs more than the actual event, and the market is currently grappling with concerns over potential trade wars. Persistent selling by foreign investors continues to add pressure.

“Given the prevailing weakness, traders should maintain a cautious stance with a negative bias until clear signs of a pause or reversal emerge. It is also advisable to manage leverage carefully and prioritize hedged trades for risk management,” said Mishra.

According to D-Street experts, the markets are adjusting stock valuations, particularly the high PE ones, as long-term growth prospects are being considered realistically rather than optimistically.

“Weak earnings expectations from banks due to rising bad loan provisions and margin pressure added to the selling pressure. MSCI index reshuffling has caused volatility, leading to outflows from passive funds,” said Dr. Narayani Ramachandran, Director & Professor of Finance at NMIMS Bengaluru.

High US bond yields make equities less attractive, prompting foreign investors to shift funds to China, where valuations and policy measures offer opportunities. “Volatility may persist, and investors should monitor trends closely while considering defensive sectors like FMCG, pharma, and IT,” added Dr Ramachandran.

Also Read: Nifty 50 likely to remain range-bound in 2025, says Kotak; remains cautious on midcaps, smallcaps

“Despite these headwinds, improving Q3 earnings indicates underlying resilience. As global trade tensions ease and RBI’s policy measures take effect, investor confidence should improve, potentially leading to renewed inflows and a market recovery,” said Mayank Mundhra, FRM- VP Risk & Head Research Abans Group.

Technical View

Technically, Nifty 50 is close to the key level of 22,000 on the downside. The continuous slide lower has brought the RSI below 30, indicating oversold conditions that might lead to a rebound in coming sessions. Bank Nifty also posted sharp losses, with next support around 48,200 levels.

“With today’s losses, we are close to the signs of a market capitulation. We might see a relief rally next week based on the current oversold conditions. Still, the overall market is expected to be volatile, with a downward bias in the near term,” said Satish Chandra Aluri, Lemonn Markets Desk.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.