The Silent Collapse: 78% of Indian Stocks Down 20% in 18 Months

The Nifty 50, for the most part, continued to hold its ground over the past year and a half. Despite phases of geopolitical uncertainty and sectoral volatility, the broader perception remained that the market was stable and, to an extent, reliable. The absence of a sharp correction in benchmark indices reinforced this belief, allowing confidence in the market’s resilience to persist.

However, this perception did not fully capture the underlying reality. While attention remained focused on the index, a significant shift was taking place across the broader market: one that did not immediately attract scrutiny. Over time, and largely without widespread recognition, a majority of stocks began to decline in a sustained and meaningful way.

The Data That Was Overlooked

According to data reported by The Economic Times, nearly 64% of listed stocks with a market capitalisation above ₹1,000 crore have declined by more than 30%, and 78% of listed stocks fell nearly 20% from their peaks over the last 18 months.

This universe largely comprises mid-cap and small-cap companies, representing a broad and actively invested segment of the market rather than illiquid fringe stocks. A decline of this magnitude across such a large segment reflects a systemic repricing rather than isolated weakness.

Market Breadth and Trend Deterioration

The decline is further reflected in market breadth indicators. The percentage of NSE-listed stocks trading above their 200-day moving average has remained low over the past 18 months.

Source: TradingView.com

At several points, only around 15-30% of stocks were above their 200-day moving average, implying that nearly 70-85% were in a sustained downtrend. This indicates that weakness was widespread across the market, even when the index appeared relatively stable.

What makes this phase particularly significant is not only the scale of the decline but the manner in which it unfolded. There was no single triggering event, no sharp breakdown that forced a reassessment of market conditions. Instead, the decline was gradual, spread across sectors, and extended over time.

Prices did not collapse abruptly; they moved lower steadily and persistently. This structure made the correction less visible and therefore less examined.

What Drove This Broad-Based Decline

The scale of this correction suggests that it was not triggered by a single event, but by a combination of structural and macroeconomic factors.

One of the primary drivers was valuation normalisation. The rally leading up to 2024 had pushed valuations across mid-cap and small-cap segments to elevated levels. As earnings growth moderated, these valuations became difficult to sustain, leading to a gradual repricing.

At the same time, foreign portfolio investor (FPI) flows remained inconsistent, with periods of sustained outflows putting pressure on a wide range of stocks. Unlike domestic flows, which tend to be more stable, FPI movements often reflect global risk sentiment and liquidity conditions, amplifying market corrections.

In addition, sectoral weakness, particularly in export-oriented and growth-sensitive sectors, contributed to the decline. Global uncertainties and shifting expectations around growth led to reduced participation across several segments of the market.

Taken together, these factors did not trigger a sharp correction but instead resulted in a slow and broad-based adjustment across the market.

The Reality Investors Experienced

For many investors, the impact of this phase has already been felt. Portfolios have weakened, and individual holdings have seen meaningful drawdowns. Yet, in the absence of a visible index-level correction, these outcomes were often interpreted as stock-specific or temporary.

In reality, they were part of a broader pattern. A majority of the market had already entered a sustained decline, even if it was not formally recognised as such.

Why the Nifty 50 Did Not Reflect This

The divergence between index performance and broader market behaviour can be explained by structure.

The Nifty 50 is concentrated in a relatively small number of large-cap stocks, each carrying

significant weight. As long as these stocks remain stable, they can offset declines across a wider universe of companies.

In addition, periods of uncertainty often lead to capital concentration in perceived stability. This results in continued support for index heavyweights, even as participation across the broader market weakens. The outcome is a divergence between what is visible and what is occurring beneath the surface.

The Gap Between Perception and Reality

This phase highlights the limitations of relying solely on index performance as a measure of market health.

Indices reflect weighted price movement, but they do not capture the breadth of participation. When a majority of stocks are declining, but a minority continue to support the index, the overall picture becomes distorted.

In the current environment, this distortion has been significant. The market has undergone a widespread correction, even as the index has suggested relative stability.

A Market Phase That Escaped Attention

The past 18 months represent a market phase that does not conform to the typical patterns of decline. There has been no defining moment, no visible transition from stability to stress. Instead, the correction has unfolded gradually, across a large portion of the market, and over an extended period. It is precisely this structure that allowed it to remain underexplored.

The answer lies in the gap between perception and reality, between what the index reflects and what the broader market experiences.

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