Are we headed for a bear market in 2025?

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Subscribe to enjoy similar stories. For stock market bulls, 2025 hasn’t started on a promising note. After a strong rally in the first two trading days of the year, the market has faced significant volatility, eroding positive sentiment and casting doubts over a stable year ahead.

This follows the market correction of 2024, which had left investors hoping for economic boosters such as tax cuts in the upcoming budget. However, those hopes are now overshadowed by fears surrounding the fast-spreading HMPV (Human Metapneumovirus), with a few cases detected in India. Uncertainty—something financial markets dislike—has taken hold of investors and traders.

Coupled with persistent foreign investor selling, the Indian stock market has turned risk-averse, making life difficult for the bulls. While this doesn’t mean a bear market is imminent, it’s evident that positivity is scarce. In such an environment, fear and speculation about worst-case scenarios, including the possibility of a bear market, naturally emerge.

Let’s explore this possibility. At its core, a bear market stems from a decisive shift in sentiment from optimism to pessimism. When investors collectively believe that stock prices will decline, fear takes over.

Concerned about potential losses in their portfolios, they decide to sell their stocks pre-emptively, anticipating further price drops. This fear-driven selling pushes prices down, which only amplifies anxiety and triggers more selling. This cycle of fear and selling becomes a self-fulfilling prophecy, culminating in a market crash.