Nifty, Sensex: India middle-class jitters amid stock market rout

Two years ago, on the advice of his bank advisor, Rajesh Kumar withdrew all his savings, including fixed deposits, and invested them in mutual funds, stocks, and bonds. The booming Indian stock market attracted Mr. Kumar, an engineer from Bihar, to join millions of others investing in listed companies. Six years ago, only one in fourteen Indian families invested their savings in the stock market, but now that proportion has risen to one in five.

However, the situation has reversed. Over the past six months, the Indian stock market has been in a continuous decline due to foreign investor withdrawals, high valuations, weakening profitability, and the global shift of capital to China; investor value has evaporated by $900 billion since its September peak. Although the decline began before U.S. President Donald Trump announced tariffs, the tariffs have become a greater headwind as more details are revealed.

India's benchmark Nifty 50 index, which tracks the performance of the country's top 50 listed companies, is experiencing its longest losing streak in 29 years, having fallen for five consecutive months. This is a significant downturn for one of the world's fastest-growing markets. Stockbrokers are reporting a one-third drop in their trading activity.

"For more than six months, my investments have been in the red. This is the worst experience I've had investing in the stock market in the past decade," said Mr. Kumar. Mr. Kumar, 55, now has little money in the bank, as he has transferred most of his savings to the stock market. With his son's private medical college tuition of 1.8 million rupees (approximately $20,650; £16,150) due in July, he worries about selling investments at a loss to cover the costs. "Once the market recovers, I plan to move some of the money back to the bank," he said.

His anxiety reflects the concerns of millions of middle-class Indians from cities big and small who have flocked to the stock market as part of a financial revolution. Systematic Investment Plans (SIPs) are the preferred investment method, through which funds collect fixed monthly contributions. The number of Indians investing through SIPs has exceeded 100 million, almost triple the 34 million five years ago. Many first-time investors, attracted by the promise of high returns and with limited risk awareness, are often influenced by "financial influencers" on social media platforms such as Instagram and YouTube, who range from experts to amateurs.

The experience of Tarun Sikar, a retired marketing manager, offers a glimpse into the profile of India's new investors. When his Public Provident Fund (a government-backed tax-free investment) matured last year, he sought a way to secure his retirement. Having suffered losses in the stock market in the past, he turned to mutual funds—this time with the help of an advisor, and with the market booming.

"I have invested 80% of my savings in mutual funds and kept only 20% in the bank. Now my advisor is warning me—don't check your investments for six months unless you want to have a heart attack!" Currently, Mr. Sikar is not entirely sure if transferring his retirement funds to the stock market was the right decision. "I was both ignorant and confident," he said candidly with a hint of bitterness. "Not understanding what was happening and why the market was reacting the way it was, but also being confident because the 'experts' on Instagram made investing sound like a fast track to becoming a millionaire. At the same time, I knew I could be falling into a trap of deception and hype."

Mr. Sikar said he was drawn in by the hype surrounding stocks on television shows and the excited chatter in WhatsApp groups. "TV anchors were hyping up the market, and people in my WhatsApp groups were boasting about their gains in the stock market," he said. In his spacious apartment building, even teenagers were discussing investments—in fact, during a badminton game, a teenager offered him a hot tip on a telecom stock. "When you hear all this around you, you start thinking—why not give it a try? So I did, and then the market crashed." Mr. Sikar remains hopeful. "I am praying. I am sure the market will recover and my funds will return to profitability."

There are others who took even greater risks and have already lost money. Ramesh (pseudonym), an accounting clerk from a small industrial town in western India, was lured by videos promising quick riches and borrowed money to invest in stocks during the pandemic. Hooked on YouTube influencers, he invested in highly risky penny stocks and derivatives trading. This month, after losing more than $1,800 (more than a year's salary for him), he closed his brokerage account and vowed to never touch the stock market again.

"I borrowed this money, and now creditors are chasing me," he said. Ramesh is one of 11 million Indians who collectively lost $20 billion in futures and options trading before regulators intervened.

"This crash is different from the one during the COVID pandemic," said financial advisor Sameer Doshi. "Back then, we had a clear path to recovery, with vaccines on the horizon. But due to the Trump factor, uncertainty looms over us—we simply don't know what will happen next."

Driven by digital platforms, low-cost brokerage firms, and government-promoted financial inclusion, investing has become easier—smartphones and user-friendly apps have simplified market participation, attracting a wider and younger audience looking for alternatives to traditional assets. On the other hand, many new Indian investors need a reality check. "The stock market is not a casino—you have to manage your expectations," said Monica Halan, a writer and financial educator. "Only invest in stocks that you don't need for at least seven years. If you're going to take risks, understand the downside: How much might I lose? Can I afford that loss?"

The timing of this market crash could not be worse for the Indian middle class. Economic growth is slowing, wages remain stagnant, private investment has been sluggish for years, and job creation is not keeping pace. Amid these challenges, many new investors drawn in by rising markets are now grappling with unexpected losses. "In normal times, savers can withstand short-term setbacks because they have stable incomes and can continuously add to their savings," financial analyst Arunidio Chakraborty pointed out.

"Now, we are in the midst of a massive economic crisis facing the middle class. On the one hand, white-collar job opportunities are decreasing, and salary increases are low. On the other hand, the actual inflation faced by middle-class families—rather than the average retail inflation compiled by the government—is at its highest level in recent times. In such a moment, a stock market correction is disastrous for the financial well-being of middle-class families."

Financial advisors like Jaideep Marathe believe that if market volatility persists for six to eight months, some people will start withdrawing funds from the market and transferring them to safer bank deposits. "We spend a lot of time telling clients not to liquidate their portfolios and to see this as a cyclical event." But clearly, not all hope is lost—most believe the market is simply adjusting from its previous peaks.

Veteran market expert Ajay Bagga says that foreign investors' selling has slowed since February, suggesting that the market decline may be nearing its end. After the correction, valuations for many stock market indices have fallen below their 10-year averages, providing some breathing room. Bagga expects GDP and corporate earnings to improve, driven by $12 billion in income tax cuts and lower interest rates in the federal budget. However, geopolitical risks—conflicts in the Middle East and Ukraine, as well as Trump's tariff plans—will keep investors cautious.

Ultimately, this market crash may provide a profound lesson for new investors. "For those who entered the market just three years ago and enjoyed 25% returns, this correction is a very necessary wake-up call—this is not normal," Ms. Halan said. "If you don't understand the market, stick to bank deposits and gold. At least you're in control."