The Indian stock market is experiencing ongoing selling pressure from foreign institutional investors (FIIs), who sold shares worth ₹7,536 crore on Friday. Despite domestic institutional investors (DIIs) purchasing stocks valued at ₹12,293 crore during the last trading session of February, they were unable to alter the trading behavior of FIIs. Ultimately, FIIs concluded February as net sellers, offloading shares worth ₹6,640 crore in cash. This marks the eighth consecutive month that FIIs have been net sellers in the cash market, continuing their selling trend since July 2025.
The Bank of Japan’s decision on interest rates has raised concerns among stock market analysts, who predict that the situation may deteriorate further as the US economy faces inflationary pressures due to the Bank of Japan’s rate increase. After a 17-year period of maintaining negative interest rates, the Central Bank of Japan has opted to raise rates to 2.50%. This move is anticipated to boost demand for Japanese government bonds and put an end to the cash carry system for foreign institutional investors (FIIs). Consequently, funding costs for FIIs are likely to increase, while the availability of capital may decrease. As a result, the upcoming meeting of the Bank of Japan (set for March 18 – 19) is drawing significant attention from both bullish and bearish investors in global markets.
Foreign Institutional Selling Pressure
Analysts have also suggested that an increase in the demand for Japanese government bonds could exert pressure on U.S. treasury bonds, resulting in a weaker U.S. dollar and elevated inflation rates in the U.S. Such changes are anticipated to impact the U.S. stock market, with the Indian market likely not remaining unaffected. They indicated that the U.S. economy is nearing another recession, and the Nifty 50 index could potentially hit 15,000 by the close of 2027.
Sugandha Sachdeva, the Founder of SS WealthStreet, commented on the economic hurdles currently confronting global markets, including the Indian stock market, stating, “High borrowing demands, ongoing fiscal deficits, and worries about the sustainability of long-term debt are constraining governments’ ability to implement extensive stimulus measures if growth declines further.”
An expert from SS WealthStreet indicated that the interplay of geopolitical instability, fluctuating trade policies, AI-driven workforce changes, and limited fiscal options implies that the global economy is undergoing a structural adjustment phase characterized by reduced trade activity, cautious investments, and tempered consumption. This represents a synchronized cooling rather than a severe downturn, yet it is a situation that requires vigilant observation.
Domestic Investors’ Response
The impending economic downturn in the US is concerning. Amit Goel, Chief Global Strategist at PACE 360, remarked on the current state of the US economy, stating, "The US economy is exhibiting a delicate resilience, where a low hiring rate is preventing an increase in job openings. Essentially, the job losses in the US are being mitigated by reduced hiring. This situation is influenced by the recent interest rate decision from the Bank of Japan. After 17 years, the Japanese Central Bank has decided to raise its interest rates to 2.50%. Consequently, investors are anticipating that the interest rate from the Japan Central Bank will stabilize around 2.50%, along with a surplus amount."
Amit Goel mentioned that investors are holding off on purchasing Japan’s treasury bonds until they see an increase in the Bank of Japan’s interest rate. As a result, the demand for U.S. Treasury bonds has decreased, which is exerting pressure on the U.S. dollar (USD) and hindering the Federal Reserve’s efforts to keep inflation under 2%. This situation has created a new challenge for the U.S. economy — escalating national debt, which currently stands at approximately $38 trillion. Consequently, the U.S. is obligated to pay around $1 trillion in interest annually due to this debt.
Discussing the state of the global economy, Sugandha Sachdeva remarked that the world economy is increasingly indicating a late-cycle slowdown instead of a full-blown recession, although the underlying vulnerabilities across key regions are becoming more apparent. The expansion driven by post-pandemic stimulus seems to be shifting into a phase of productivity-led growth, albeit unevenly, where advancements are primarily seen in specific technology and automation sectors, while overall demand momentum is diminishing.
FIIs’ Continuous Selling Trend
“The bond markets are indicating cautious growth prospects through stable yet defensive yield patterns, while equity markets exhibit volatility stemming from uncertainty instead of systemic panic, suggesting a gradual slowdown rather than a sudden downturn,” Sugandha remarked.
Amit Goel from PACE 360 anticipates that the US economic downturn will impact the Indian economy by late 2026. He stated, “The vulnerability of the US economy’s stability is likely to affect India between October and November 2026. This is due to India’s household debt reaching 70% of GDP, alongside a projected 50% decline in earnings per share. Consequently, the impending economic downturn could evolve into a depression, with significant job losses anticipated. The IT and technology sectors are expected to be the hardest hit, leading to a prolonged economic crisis lasting possibly two to two and a half years.”
Financial analysts forecast that the upcoming two years will pose significant difficulties for the equities market, urging investors to explore safer asset options.
Market Concerns Over Inflation
Will the Nifty 50 reach 15,000 by the conclusion of 2027? Amit Goel from PACE 360 anticipates a significant decline in the Indian stock market, stating, "The Nifty 50 is projected to drop below 21,000 by the end of this year. The index, comprising 50 stocks, is likely to continue its downward trend next year, interspersed with some temporary recoveries. By 2027, the Nifty 50 index is forecasted to settle around 15,000."
An expert from PACE 360 indicated that the immediate and vital support levels for the key benchmark index are 24,600 and 24,000. Should the 50-stock index drop below these levels, it is expected to test the next significant support range between 22,100 and 22,000. He mentioned that the Nifty 50 index would likely reach these points following some temporary recoveries.
The Nifty 50 experienced significant increases following the announcement of the India-US trade agreement, but it was unable to maintain those increases and has since remained within a narrow trading range.
Rohit Srivastava, the Founder & Global Strategist at indiacharts.com, suggests that the market could face ongoing pressure at elevated levels if the index does not surpass its historical peak.
"The peak reached in January was significant, and not exceeding it suggests that the market could stay under strain at elevated levels. A concluding diagonal formation in the last quarter of 2025 indicates a crucial stock market peak for the upcoming year," remarked Srivastava.
In a previous discussion with LiveMint, Rohit Srivastava from indiacharts.com also forecasted that the Nifty 50 might hit 19,000 by the year’s end due to international challenges.
The looming possibility of a US-Iran conflict intensifies as Israel launches an attack on Iran today. “Geopolitical uncertainties continue to be a significant concern. Rising tensions in the Middle East present substantial risks to global energy security. Any interruption or obstruction of the Strait of Hormuz, which is responsible for nearly 20% of the world’s oil supply, could lead to a dramatic increase in crude oil prices, elevate freight and logistics expenses, and reignite inflationary trends globally,” stated Sugandha from SS WealthStreet.
The expert from SS WealthStreet indicated that such a situation would complicate the policies of central banks, necessitating a careful equilibrium between managing inflation and fostering economic growth. Concurrently, global trade continues to be susceptible to uncertainties in policy. Ongoing developments related to tariffs in the U.S., including legal disputes and possible reversals, have introduced confusion for supply chain management and fiscal income. Should tariff revenues decrease while trade deficits stay high, fiscal challenges could escalate.
Is the integration of AI introducing new complexities? Emphasizing the transformative nature of AI integration, Sugandha Sachdeva remarked, “The incorporation of AI is introducing an additional layer of intricacy. Although automation and artificial intelligence are boosting productivity and fostering long-term efficiency, they are simultaneously speeding up the recalibration of the labor market.”
Sugandha mentioned that the hiring pace in the white-collar and tech sectors has slowed down as companies focus more on cost efficiency and automation rather than expanding their workforce. This period of job turnover and possible layoffs could hinder wage increases, consumer confidence, and overall demand in the short term, even if productivity improvements occur in the long run.
US-Iran conflict update: Israel strikes Iran Israel executed a preemptive strike on Iran this past Saturday, while a military operation by the United States is in progress, escalating tensions in the Middle East and further diminishing the prospects for a diplomatic resolution to Tehran’s nuclear issues with the West.
As reported by Reuters, U.S. military forces have commenced a series of strikes targeting locations in Iran, according to two officials who spoke to Reuters on the condition of anonymity. The full extent of the air and naval operations remains unclear at this time. An Iranian official informed Reuters that Iran was gearing up for a severe response.
A source informed Reuters that Iran’s supreme leader, Ayatollah Ali Khamenei, was not present in Tehran and had been moved to a secure site.
Where should one consider investing? Amit Goel advised investors to focus on safe-haven assets over the next two years, stating, "It is wise to gather long-term government bonds before the current financial year concludes and maintain them for the next two years, until the global economic downturn eases."
