As I have been saying, FIIs will sell aggressively to pull the Nifty 50 down, and that is exactly what is happening now. If FIIs do not bring the Nifty 50 down at this stage, then DIIs may again push the index towards its all-time high levels. If that happens, market valuations will remain expensive and we may not see the next bull run anytime soon.
Investors should try to understand the market in terms of valuations, rather than focusing only on factors like Trump or geopolitical wars. In many cases, such events actually provide an opportunity for the market to correct and bring valuations back to reasonable levels. Otherwise, the market would remain near all-time highs where investors get no returns.
Today, the Nifty 50 is down around 1.6%, while the Smallcap 250 index is down only about 0.3%. This clearly indicates that the Nifty 50 is still relatively overvalued, whereas the Smallcap 250 index is already available at attractive valuations. That is why we are not seeing a major fall in small-cap stocks, while large-cap stocks are witnessing sharper corrections.
As I have mentioned earlier, Nifty 50 may need to correct towards the 23,000 ± 500 level. FIIs are the only participants with enough capital to pull the index down to such levels. DIIs, on the other hand, have been continuously buying in the market.
I have repeatedly said in my YouTube videos that towards the end of every bear phase, the market usually experiences a sharp fall first, and only after that does the next bull market begin. The same pattern seems to be playing out now.
Our bear market predictions have largely turned out to be correct because we analyze the market based on valuations and earnings, rather than short-term news.
I believe that the Smallcap 250 index could witness a strong rally once the bull market begins. Currently, the index is around 15,000, and I expect it to consolidate around these levels until the Q4 results are announced.
Since the Nifty 50 has not corrected significantly yet, whenever it falls, it creates some pressure on the Smallcap 250 index as well. However, the impact on small caps is relatively limited compared to large caps.
Historically, when the market forms a bottom at the end of a bear phase, there is usually a trigger or event behind it.
In the 2018–19 bear phase, the COVID crash formed the market bottom.
In the 2022–23 correction, the Hindenburg report on the Adani Group triggered a sharp fall that helped form the bottom.
Similarly, in the 2025–26 bear phase, the Israel–Iran war may act as the trigger that helps the market reach reasonable valuations and form a bottom.
Therefore, investors should not see the war purely as a negative factor for the market. In fact, it may help the market correct faster and form a bottom sooner. Otherwise, the bear market could have lasted for a much longer period.