Nifty 50 Slides For 3rd Straight Day Post Operation Sindoor Exuberance – What Should Investors Do

India’s equity markets ended sharply lower on May 20, extending their losing streak for the third consecutive day, weighed down by a mix of domestic and global factors. The Sensex fell 872.98 points or 1.06 per cent to close at 81,186.44. Likewise, Nifty 50 tumbled 261.55 points or 1.05 per cent to end at 24,683.90.

Mirroring the benchmarks, the broader market indices also declined. The Nifty Midcap 100 index plunged 1.62 per cent, snapping its 6-day winning streak. Likewise, the Nifty Smallcap 100 index also ended its 6-day winning streak, slipping 0.94 per cent in today’s session.

All the major sectoral indices closed the session in red, with Nifty Auto declining the most (2.17 per cent). Nifty Pharma, Nifty Healthcare, Nifty FMCG and Nifty Realty slipped more than 1 per cent.

This slump comes after a strong rally in the previous week (May 12-16) amid exuberance of the Operation Sindoor executed by the Indian armed forces, during which both the headline indices surged around 4.2 per cent, and Nifty Midcap 100 and Nifty Smallcap 100 also roughly gained over 9 per cent each.

Indian armed forces carried out precision missile strikes on nine terrorist hideouts across Pakistan and Pakistan-occupied Kashmir on the intervening night of May 6 and May 7, in retaliation to the terrorist attack in Pahalgam, Kashmir, which had claimed 26 tourists lives.

Overall Investor Sentiment Remained Negative

Overall sentiments remained cautious in the market today as 42 of 50 Nifty constituents and 27 of 30 Sensex stocks ended the session in the red.

Of the 4,104 stocks traded on the BSE, only 1,435 stocks advanced while majority 2,534 stocks declined. On the NSE, out of 2,969 stocks traded today, only 915 stocks advanced, while 1,974 stocks declined.

In other words, two out of every three stocks ended the day in red, indicating an overall subdued investor sentiment.

Why Stock Market Fell Today

According to Devarsh Vakil - Head of Prime Research, HDFC Securities, the decline today came amid reports of increasing COVID-19 cases in Southeast Asian countries like Singapore and Hong Kong.

Devarsh Vakil, Head of Prime Research at HDFC Securities, noted that ongoing India-US trade discussions also weighed on investor sentiment, adding to the pressure on markets. He further added that a sell-off in Japanese bonds has pushed up borrowing costs, further fuelling global uncertainty and reducing overall risk appetite.

Meanwhile, Ajit Mishra – SVP, Research, Religare Broking attributed today’s decline to profit-booking. He said, “Profit-taking in heavyweight stocks across sectors dragged the Nifty index down.”

Mishra also added that the decline signals growing caution among investors in the absence of any major domestic triggers and amid global uncertainties. He said that volatility in the US markets and concerns around the potential impact of the US-China trade deal on foreign institutional investors (FIIs) flows into emerging markets like India have also dampened sentiment.

Vinod Nair, Head of Research at Geojit Investments, said the absence of major positive triggers and ongoing uncertainty around US fiscal stability prompted investors to book profits and turn cautious. He noted that selling pressure was broad-based, as market participants awaited more clarity on the outcome of the India-US trade agreement.

How Nifty 50 Stocks Are Currently Valued

Manasvi Garg, a Securities and Exchange Board of India-registered investment advisor (Sebi RIA), CFA, and founder and CEO of Moneyvesta, told Outlook Money: “As of today, the Nifty 50 index traded at a price-to-earnings (P/E) ratio of 22.3, which is 5.1 per cent below its 10-year trailing P/E median of 23.5.” Large-cap stocks are currently better valued compared to mid-cap and small-cap stocks, he said.

Garg said that FIIs have started buying Indian shares again, adding that large-cap stocks could see renewed momentum and attract increased investor interest in the coming months.

According to Ajit Mishra of Religare Broking, “In the current environment of heightened global macroeconomic uncertainty, large-cap companies are better positioned due to their historically stable margins and consistent earnings growth compared to mid- and small-cap peers.”

Mishra added that supportive policy measures such as interest rate adjustments, liquidity infusions, and increased government spending are expected to drive corporate earnings. “As a result, Nifty 50 earnings are projected to grow by 12 per cent to 13 per cent in FY26.”

Shrikant Chouhan, Head Equity Research, Kotak Securities, too, concurs that large-cap stocks appear fairly valued at current levels. He expects the Nifty 50's earnings per share (EPS) to be Rs 1,018 in FY25, Rs 1,127 in FY26, and Rs 1,297 in FY27. Based on these projections, he said, the Nifty 50 is currently trading at a valuation of 24.6 times FY25 earnings, 22.2 times FY26 earnings, and 19.3 times FY27 earnings.

What Should Investors Do

CFA Garg advises retail investors to remain calm and stay invested during market corrections. “It is important not to stop systematic investment plans (SIPs) or withdraw long-term investments, as these temporary downturns are a normal part of market cycles.”

Instead, he suggests investors to view these corrections as opportunities to invest more through systematic plans like SIPs or systematic transfer plans (STPs), taking advantage of lower valuations. “While short-term risks such as global trade tensions and fluctuations in FII flows may cause market volatility, investors should not overshadow the long-term growth story of India. With strong economic fundamentals and steady corporate earnings, India remains a compelling investment destination. Staying disciplined and focused on long-term goals is the key to building wealth over time,” he said.

Mishra of Religare suggests that investors should deploy capital gradually, either through SIPs or by taking advantage of market dips. He advises focusing on fundamentally strong companies that demonstrate consistent growth and sustained profitability.

Mishra said, “Market corrections and consolidations often present better entry points, especially for quality large-cap stocks.” He further advises to be selective in small and midcaps. “Invest only where valuations are reasonable and promoter quality is strong. Avoid panic selling during short-term corrections unless there is a clear deterioration in a company’s fundamentals. Patience, discipline, and a long-term view are key to navigating volatility and benefiting from India’s structural economic growth,” he said.

Meanwhile, Chouhan of Kotak Securities recommended booking profits if the market approaches the 25,500 mark, and advised accumulating select stocks during market corrections.