Bloodbath on Dalal Street: Sensex Plunges, Investors in Panic

Market Mayhem Shakes Investors

Dalal Street witnessed a massive selloff on Friday (February 28) as the Sensex nosedived by nearly 1,400 points, while the Nifty slipped below 22,150, sending shockwaves through the investor community. The drastic plunge has left market participants reeling, with many scrambling to understand the reasons behind the sudden downturn and when a recovery can be expected.

Massive Erosion of Market Capitalization

In just the first 45 minutes of trading, around Rs 6 lakh crore was wiped off the market capitalization of listed companies on the Bombay Stock Exchange (BSE). All major sectoral indices were deep in the red, with IT, auto, media, and telecom sectors witnessing a decline of 2-3% each. The BSE Midcap and Smallcap indices also dropped by 2% each, exacerbating investor concerns.

While major losers on the Nifty included IndusInd Bank, M&M, Wipro, Tech Mahindra, and Infosys, there were a few gainers, such as Coal India, Shriram Finance, Reliance Industries, and Grasim. However, the overall market sentiment remained extremely bearish.

What Triggered the Market Selloff?

The primary trigger for the sharp market downturn was the prevailing uncertainty over U.S. President Donald Trump’s stance on global tariffs. Throughout the week, Trump’s mixed messaging regarding tariffs on Mexico, Canada, and the European Union (EU) has created an atmosphere of unpredictability.

According to Prashanth Tapse, Senior VP (Research) at Mehta Equities, Trump’s announcement of a 25% tariff on EU imports and Nvidia’s mixed quarterly results have acted as key negative catalysts, dampening investor sentiment further.

Adding to the woes, Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, pointed out that foreign outflows have continued unabated, placing additional pressure on the markets. With global cues remaining weak and profit-booking taking place across broader equity markets, investors are increasingly shifting to cash positions amid the uncertainty.

Stock Market Volatility and Investor Concerns

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that stock markets thrive on stability, and Trump’s tariff announcements have fueled volatility. “Markets have not yet priced in a full-blown trade war between the U.S. and China, though the likelihood of avoiding one remains. However, the rising uncertainty has caused a spike in the Chicago Board Options Exchange’s (CBOE) Volatility Index (VIX) to 21.13,” he said.

The VIX, also known as the “fear gauge,” measures market expectations of volatility over the next 30 days. A sharp rise in this index indicates growing investor anxiety and heightened risk aversion.

Will the Market Recover in March?

Market analysts believe that a recovery may be on the horizon in March, driven by improved macroeconomic indicators and a slowdown in foreign institutional investor (FII) selling.

Dr. Vijayakumar noted that large-cap valuations remain fair, making them attractive for long-term investors. He advised investors to use the market weakness as an opportunity to accumulate high-quality, fairly-valued large-cap stocks, particularly in the defense sector, which has undergone a significant correction.

Nifty Trends and Technical Analysis

Prashanth Tapse pointed out that recent Nifty trends have been uninspiring. He noted that Nifty is struggling to maintain momentum and behaving “much like a tortoise.”

“Nifty’s strength depends on surpassing the 24,074 mark, with downside risks at 22,300 and 21,281. Traders should consider selling Nifty and Bank Nifty, while stocks like Adani Enterprises, MCX, and SBI are bearish on intraday strength,” he advised.

Sectors Facing the Worst Decline

IT and auto stocks were among the hardest hit, with the Nifty IT and Nifty Auto indices recording sharp drops.

Aditya Gaggar, Director of Progressive Shares, stated, “The auto sector is expected to remain under pressure, with stocks like Bajaj Auto and Hero Motocorp breaking key support levels. Similarly, the IT sector remains bearish, and the metals sector is also likely to continue its negative bias.”

Additionally, the real estate sector breached its previous swing support, indicating continued bearish momentum. Any rally in this sector is likely to face selling pressure at higher levels.

What Should Investors Do Now?

While the ongoing market crash has sparked panic among retail investors, experts suggest staying calm and making calculated moves.

Instead of reacting impulsively to market volatility, investors should focus on high-quality blue-chip stocks that have become fairly valued due to the correction. Some brokerage firms have also suggested accumulating defense stocks, given their recent sharp declines, as a long-term investment opportunity.

When Will the Market Rebound?

Despite the bloodbath on Dalal Street, a market rebound is expected in March, driven by improved macroeconomic conditions and a potential easing of FII selling. Investors are advised to avoid panic selling and instead look for fundamentally strong stocks at attractive valuations.

While volatility may persist in the short term, long-term investors can use this period as an opportunity to build a robust portfolio. The key to navigating market uncertainty is patience, prudent stock selection, and staying focused on long-term growth.

{Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect our views}

(With inputs from agencies)