Sensex nosedives over 3,000 points in just 6 sessions: Time to look beyond equities?

The Indian stock market continued its downward trajectory for the sixth consecutive session on February 12, with the benchmark Sensex plunging over 900 points in morning trade amid mixed global cues. The 30-share index tumbled from its previous close of 76,294 to an intraday low of 75,388, while the Nifty 50 fell over 1 per cent to touch 22,798.

One of the key reasons behind the persistent market downturn is the escalating global trade tensions triggered by former US President Donald Trump’s tariff policies. His shift from targeting select countries such as Mexico, Canada, and China to imposing import tariffs on steel and aluminium across all nations has intensified concerns. The European Union’s announcement of retaliatory counter tariffs has further increased the probability of a full-blown trade war, leaving investors on edge.

Additionally, the US Federal Reserve dashing hopes of further rate cuts this year, aggressive outflows by foreign portfolio investors, weak corporate earnings and expensive valuations have also eroded the sentiment.

Over the past six sessions, Sensex has lost 3,188 points, or 4 per cent, while Nifty has declined by 940 points or 4 per cent.

“Trump’s tariff tantrums have been impacting the markets for the last several days. The European Union’s declaration that they will retaliate with counter tariffs has raised the probability of a full-blown trade war. How this will pan out remains to be seen. It is important to understand that President Trump, however powerful he might be, cannot manipulate the laws of economics. When higher tariffs raise inflation in the US and the Fed responds hawkishly, the US stock market will crash. This will restrain Trump. But it will take some time. Meanwhile, the drama and the volatility in the market will continue,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Exploring Investment Avenues Beyond Equities

With equities facing turbulence, diversification across multiple asset classes is becoming a key focus for investors in 2025.

Rohit Murarka, Business Head at Kotak Cherry, highlighted that 2025 is poised to be a year of asset allocation. He recommended a well-balanced portfolio that includes equities, fixed income, real estate, and commodities to manage risk effectively and optimise returns.

Murarka noted that market fluctuations make fixed-income investments an essential component of a diversified portfolio, as they provide stability in uncertain times. Additionally, he emphasised that asset classes like real estate and commodities can serve as hedges against global uncertainties and inflationary pressures.

Trivesh D, COO of Tradejini, also echoed similar sentiments, advising investors to focus on diversification to strengthen their portfolios. 

He identified Gold ETFs and real estate as viable investment options. According to him, Gold ETFs offer a modern and cost-effective way to invest in gold, providing liquidity and ease of trading on stock exchanges. These ETFs are particularly beneficial for hedging against market volatility and potential price appreciation.

On the other hand, real estate remains a robust long-term investment, delivering stable returns through capital appreciation and rental income, he said. Trivesh emphasised that spreading investments across asset classes is crucial for long-term growth and effective risk management.

Navigating Market Weakness

As markets remain under pressure, investors are seeking guidance on the best course of action. Experts believe that while volatility persists, strategic asset allocation and diversification can help mitigate risks and optimise returns.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, suggested that investors can take advantage of the current market weakness by shifting from mid and small-cap stocks—still considered overvalued—to fairly valued large-cap stocks. He noted that the market is currently in oversold territory, making a short-term rebound likely. However, with foreign institutional investors (FIIs) expected to sell into any rally, the upside potential remains limited.

Meanwhile, Devarsh Vakil, Head of Prime Research at HDFC Securities, stressed the importance of staying informed about market trends and policy changes. He recommended that investors adopt a well-defined asset allocation strategy focused on fundamentally strong investment opportunities.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.