Nifty50 Extends Decline Amidst FII Sell-Off: Can March Offer a Respite?

Despite a promising start to the first trading session of March, the NSE benchmark Nifty50 is struggling to sustain gains, trading 0.20% lower and slipping below the 22,100 mark as of 2:05 PM. The downward trajectory of Indian equities has persisted for several months now, with February marking the 5th consecutive month of decline—its longest losing streak since 1996.

February witnessed a sharp 6% fall in the Nifty50 index, making it the worst February performance since the COVID-19 crash. The sell-off was largely attributed to the “Trump factor,” triggering a broad-based decline across sectors, with IT, auto, and pharma stocks bearing the brunt of the downturn.

FIIs Sell-off, Intensifying the Downtrend

Foreign Institutional Investors (FIIs) played a significant role in February’s market volatility. On February 28 alone, FIIs sold off Indian equities worth ₹11,639 crore—their largest single-day outflow for the month. Throughout February, they remained net sellers, offloading stocks worth ₹34,574 crore in total.

Out of the 20 trading sessions in February, FIIs were net buyers on only two occasions—February 18, when they invested ₹4,786.6 crore in domestic equities, and February 4, when they purchased shares worth ₹809.2 crore. Their sustained selling pressure has significantly impacted market sentiment, exacerbating the ongoing correction.

Can March Reverse the Trend? A Look at Historical Data

Historically, March has often favoured the bulls. Since the COVID-19 crash in 2020, the Nifty50 index has delivered positive returns in every March. The strongest performance came in 2022, when the index rose by 3.99%.

Looking at a broader timeframe, since 2009, the Nifty50 has closed in the red during March on just five occasions, whereas in 11 instances, it ended with gains. The highest recorded return was 10.75% in 2016, reinforcing March’s historical tendency to be a recovery month for equities.

Key Economic Data to Watch in March

March is also a pivotal month, with several crucial economic indicators set to be released. Investors will closely monitor these data points, ahead of the RBI’s policy decision in April.

• Industrial Production (IIP) & Consumer Price Inflation (CPI): Scheduled for release on March 12, these figures will offer insights into the health of the domestic economy.
• Wholesale Price Inflation (WPI): Expected on March 14, this will be a key metric for gauging inflation trends and assessing potential policy measures.

Conclusion

As markets navigate ongoing uncertainties, these economic indicators, coupled with global developments, will play a crucial role in determining the trajectory of the Nifty50 in March.

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