Indian stocks are breaking long-held supports as selloff deepens

Indian equities are breaking through key support levels as a selloff intensifies in a market once seen as a promising emerging-market destination. The NSE Nifty 50 Index has declined for seven consecutive weeks, surpassing its 200-day moving average for the first time in six years. This market downturn has been triggered by a combination of factors rather than a single event.

India's heavy dependence on oil imports means that rising prices could exacerbate inflation concerns and complicate its growth outlook. Simultaneously, a continuous surge in global bond yields is rendering domestic shares less appealing, prompting international investors to divest even more funds. Furthermore, the absence of significant contributions from artificial intelligence has diminished the desirability of Indian equities among global money managers.

Tuesday saw the Nifty 50 Index fall below its 200-day moving average on a weekly basis for the first time since March 2020. Even the 30-stock BSE Sensex breached the same support level last week. The index has lost 2.3 percent this week and is projected to experience an eighth consecutive weekly decline, marking its longest losing streak since the end of the 'dot com' bubble era.

Despite trading at their lowest valuation relative to earnings estimates since 2020, these stock levels present a stark contrast from previous years when robust economic growth, earnings expansion, and substantial domestic inflows made India one of the most attractive emerging market opportunities. The weakening rupee is exacerbating the situation by reducing dollar returns and prompting global funds to withdraw an estimated $26 billion from Indian stocks this year.