The Slippery Slope Of One More Drop. Nifty Nearing Its 28-Year Record-Breaking Crash. Is Zomato And Jio Fin To Be Blamed?

The Indian stock market is once again flirting with history, but not in a way investors would like. If the Nifty50 posts another monthly decline in February, it will mark its longest losing streak in nearly three decades. The last time Dalal Street witnessed such prolonged pain was in 1996. If the index closes in the red for the fifth straight month, it will join an elite club—one no investor wants to be a part of.

Global Jitters, Local Troubles

Indian equity markets have been on a downward spiral, tracking weak global cues. On Monday, both Sensex and Nifty slid for the fifth consecutive session, mirroring a broader sell-off in U.S. stocks due to concerns about weakening consumer demand and fresh tariff threats. The domino effect of foreign institutional investors (FIIs) pulling out over ₹2 lakh crore since October 2024 is also weighing on Indian markets, as a weaker rupee makes emerging markets less appealing.

Historically, the Nifty has only endured five or more consecutive monthly declines twice since 1990. The longest losing streak, from September 1994 to April 1995, saw an alarming 31.4% drop over eight months. The second-longest decline came in 1996, when the index plunged 26% over five months. The current downtrend, while not as catastrophic, has still seen the index fall 11.7% from October 2024 till now—and counting.

Adding fuel to the fire, technical analysts predict the Nifty could further dip to 21,800–22,000 in the short term if the weakness persists. As long as the index stays below 22,850, traders are likely to stick with a ‘sell-on-rise’ strategy.

China’s Recovery Siphoning FII Flows from India

While India’s market capitalization has shrunk by $1 trillion since October, China’s market cap has surged by $2 trillion in the same period. The Hang Seng Index has soared 18.7% in a month, while the Nifty has tumbled 1.55%, signaling a clear shift in FII sentiment.

A ‘Sell India, Buy China’ trade appears to be the trend of the moment. According to BofA Securities, global fund managers who had reduced their China exposure have now reversed course, cutting their allocations to Indian equities to a two-year low. The primary driver? China’s September 2024 economic stimulus package, which introduced regulatory easing and foreign investor-friendly policies.

Zomato & Jio Financial. Index Inclusion Raising Eyebrows

Amidst the market turbulence, the upcoming inclusion of Zomato and Jio Financial Services into the Nifty50 on March 28 has raised questions about the index’s valuation. With their entry, the benchmark’s price-to-earnings (PE) ratio—a key valuation metric—is set to increase from 20.86x to 21.37x.

Why does this matter? Well, these new entrants are expensive compared to the stocks they are replacing.

Zomato, which got listed in 2021, is trading at an eye-popping PE of 341x based on its trailing 12-month earnings.

Jio Financial, the non-banking financial arm of Reliance Industries, trades at 126x.

Meanwhile, the outgoing stocks, Britannia (PE of 53x) and Bharat Petroleum (PE of 8.5x), were relatively more reasonable.

This shift makes the Nifty appear more expensive, which in turn discourages foreign investors, who were already skeptical of India’s lofty valuations. Even after its recent decline, India remains one of the priciest emerging markets. In comparison, Taiwan trades at a PE of 18.75x and China and South Korea hover around 10x

Analysts argue that Nifty’s inclusion criteria need an overhaul. The current system allows for the addition of high-valuation, non-profitable companies, further inflating the index’s valuation.

The Last Bit, Where Is Nifty Headed?

Despite the recent sell-off, the Nifty remains relatively overvalued. Analysts caution that further downside cannot be ruled out, given the broader economic uncertainties and global market conditions.

For retail investors, the message is clear, volatility is here to stay. The Indian market is at a critical juncture, caught between global economic headwinds, shifting FII sentiment, and its own structural adjustments.

So, will Nifty break its 28-year-old record and post a historic five-month losing streak? If the current trends persist, we might just witness history in the making—though not the kind investors would like.