Sensex drops, smallcaps down 18% from peak, ₹20 lakh cr wiped out; Radhika Gupta advises calm amid selloff

Indian stock markets have come under heavy selling pressure over the past two weeks following the outbreak of the US-Iran conflict, with benchmark indices witnessing sharp declines amid rising global uncertainty. On Friday, the Sensex fell 1,471 points, or 1.93%, to close at 74,563.92, while the Nifty 50 dropped 488 points, or 2.06%, to settle at 23,151.10. Broader markets saw even steeper losses, with the BSE Midcap index falling 2.61% and the BSE Small-cap index declining 2.67%, reflecting widespread selling across sectors.

The fall marked the third consecutive week of losses. During the week, the Sensex declined 4,355 points, or 5.5%, and the Nifty lost about 1,300 points, or 5.3%, while overall market capitalisation of BSE-listed firms dropped by nearly ₹20 lakh crore, falling to around ₹430 lakh crore from about ₹450 lakh crore earlier this month.

Despite the sharp correction, Radhika Gupta, MD & CEO of Edelweiss Mutual Fund, said investors should not panic, noting that markets have faced similar geopolitical shocks in the past and have eventually recovered. She said investors today are worried about three key questions — what lies ahead amid geopolitical tensions, why portfolios have remained flat for the last 18 months, and what should be done now.

Gupta said history shows that markets tend to fall during crises but recover once uncertainty reduces. She cited the 9/11 attacks in 2001, after which markets declined about 6–7% over a month but rose nearly 14% in the following six months. A similar pattern was seen after the Iraq War in 2003, when markets fell around 7–8% initially but delivered gains of about 15–16% in the next year.

She also addressed concerns about stagnant portfolios, saying many investors feel frustrated after seeing little return over the last 18 months. According to her, such phases have occurred earlier as well, and periods of weak performance are often followed by strong gains. Historically, the next 18–36 months after a flat phase have delivered annual returns of around 12–13%, she said, advising investors to stay invested and accumulate on market declines rather than exit in panic.

Way below the highs

Indian stock market indices are trading below their all-time highs, with broader markets seeing deeper corrections than benchmark indices. The Nifty 50 is down about 10.4% from its peak, while the Next 50 has fallen 14.8%, indicating stronger selling in large-cap stocks outside the top index. Mid-cap stocks have also declined, with the Nifty Midcap 150 down 8.2%, showing moderate correction. The sharpest fall is in smaller companies, as the Nifty Smallcap 250 is down 18.3% from its high. The data suggests that market volatility has hit riskier segments harder, while benchmark indices have remained relatively more resilient.

Stocks, FD or MF? Which way to go

In a separate post, Gupta also cautioned investors against rushing into stocks, mutual funds or fixed deposits without understanding the basics of money management. She said many people start investing by focusing only on what to buy, instead of learning how money works.

She advised investors to first understand the difference between saving and investing, noting that savings are meant for safety and short-term needs, while investing is for long-term growth. She also stressed the importance of understanding risk and return, as every asset class — whether stocks, bonds, gold or FDs — carries its own balance of risk and reward.

Finally, she warned against mixing insurance and investment, saying protection products should be used only to cover risks, while investments should be aimed at building wealth. According to Gupta, strong financial habits and patience are the foundation of successful investing, especially during periods of market volatility.