Indian markets are under pressure as the rupee nears a record low against the dollar and equities decline. This downturn is attributed to foreign fund outflows and global macroeconomic challenges.
Indian markets are facing a tough phase, with investors caught between a falling rupee and continued weakness in equities. On Wednesday, the Sensex slipped over 250 points in intraday trade, extending its losing streak to a third straight session. At the same time, the rupee hovered near its record low against the US dollar.
The combination has shaken confidence, especially among retail investors who have watched their portfolios shrink significantly this year.
A Difficult Phase, But Not the End of the Road
For many investors, this period feels particularly painful. Several portfolios are down 30–40 per cent so far in 2025. Yet, market experts believe panic selling could do more harm than good.
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According to analysts, the worst phase of stretched valuations and weak earnings growth appears to be largely behind us. This, they say, is a time to step back, reassess long-term goals and avoid impulsive or aggressive trading decisions.
Why the Rupee Is Under Pressure
The rupee's slide has become one of the biggest concerns for the market. Heavy foreign fund outflows, uncertainty around an India-US trade deal and global macroeconomic challenges have all weighed on the currency.
On December 17, the rupee briefly touched 91.38 against the dollar before recovering nearly one per cent, reportedly after the Reserve Bank of India intervened by selling dollars in the market.
However, experts caution that central bank support has its limits. The rupee will eventually have to stabilise on its own, which is more likely once trade clarity improves and foreign investors return amid better earnings visibility and more comfortable valuations.
Does a Weak Rupee Still Help Export Stocks?
Normally, a weaker rupee is considered good news for export-oriented sectors like IT and pharmaceuticals. This time, however, the benefit has been muted.
Ajit Mishra, Senior Vice President of Research at Religare Broking, explained that most export-focused companies already hedge their currency exposure.
"Beyond a certain point, further rupee weakness doesn't translate into meaningful gains. That's why we're not seeing a strong rally in IT and pharma stocks despite the sharp fall in the currency," he said.
Ross Maxwell, Global Strategy Operations Lead at VT Markets, added that while currency weakness often reflects global risk aversion, it can still throw up selective opportunities for disciplined investors.
How Should Investors Approach the Market Now?
Experts agree on one thing: this is not a market for broad, high-risk sectoral bets. Instead, investors should focus on quality businesses with strong balance sheets, steady cash flows and reasonable valuations.
The medium- to long-term outlook for Indian equities remains positive, but stock selection will be far more important than chasing quick rebounds.
Private Banks Look Better Placed
Among sectors offering relative comfort, private banks stand out.
Mishra believes much of the near-term pressure on net interest margins is already priced in. Asset quality concerns, he said, are largely behind the sector, while recent quarterly earnings point to improving trends.
He prefers HDFC Bank and Kotak Mahindra Bank as relatively stable plays in the current environment.
Cement and Auto Stocks Offer Select Opportunities
Cement is another sector experts are optimistic about. Mishra noted that the industry's consolidation phase appears to be over, prices have stabilised and demand is holding up.
"With no major price erosion and improving demand visibility, the outlook for cement remains positive," he said, naming UltraTech Cement and Shree Cement as preferred picks.
In autos, the opportunity is more stock-specific than sector-wide. Mishra favours Mahindra & Mahindra and Eicher Motors, citing strong product cycles and benefits from global demand.
Stocks Analysts Are Watching Closely
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said several fundamentally strong stocks are now available at more reasonable valuations.
He pointed to Bharti Airtel, Ashok Leyland, Mahindra & Mahindra, Maruti Suzuki, HDFC Bank and ICICI Bank as names investors could consider accumulating gradually. Among NBFCs, Manappuram Finance stands out due to expectations of strong earnings in the coming quarters.
Pharmaceutical stocks, he added, can also play a defensive role during uncertain market conditions.
Don't Forget Diversification and Gold
Beyond equities, experts stress the importance of maintaining a well-diversified portfolio. Gold and silver continue to act as effective hedges against currency depreciation and global uncertainty.
"Gold should remain a key part of the portfolio, preferably through ETFs or sovereign gold bonds," Maxwell said.
