The Indian stock market has been facing quite the whirlwind lately, leaving investors on edge and analysts scrambling to make sense of the trends. On October 24, 2024, the Bombay Stock Exchange (BSE) Sensex closed at 79,987, down by 94 points, with the Nifty dropping to 24,378. The backdrop to this decline is the unsettling trend of persistent foreign selling, alongside weak global cues affecting investor confidence. With foreign institutional investors (FIIs) offloading approximately ₹93,088 crore from Indian equities this month alone, concerns about the market's resilience are mounting.
This month's sell-off isn't just about investor jitters; it's reflecting a broader economic unease. The latest assessments suggest India Inc's revenue growth for the July to September quarter is projected to slow to about 5-7%, marking the weakest pace of growth seen in four years according to CRISIL. This is not good news for companies, particularly within the agriculture sector, which has seen revenues drop between 20-22%. Factors leading to these declines include falling raw material prices and sluggish recovery prospects.
Meanwhile, sectors like cement and industrial commodities are not faring muchbetter, struggling with revenue growth rates at or below 1%. Pushan Sharma, Director of Research at CRISIL, highlighted how investment and construction-linked sectors, which account for nearly 38% of their sample set, tanked as construction-linked activities dipped due to high prices driven by cheap Chinese imports. This reality is causing significant trepidation among investors, especially as the festive season approaches—typically seen as a high-demand period for many consumer goods.
Market sentiment is dampened not only by revenue reports but also by high valuations compared to more attractive global alternatives like China and Hong Kong. This mismatch is prompting many FIIs to reassess their investments, resulting in continuous outflow. To provide some perspective on this trend, analysts note how the Nifty shed over 5% this month, contributing to growing fears of instability.
On the trading front, it was evident on the 24th where the performance was mixed, as FMCG stocks took the hardest hit. Hindustan Unilever Limited (HUL) emerged as the top laggard, plunging over 5.62%, with Nestle India also experiencing declines. On the flip side, stocks like UltraTech Cement and Shriram Finance showed some resilience, slightly buoying the market amid the tumult.
Defensive sectors such as healthcare saw selective buyer interest and, encouragingly, HDFC Bank managed to stay afloat even as the broader indices continued to falter. Overall, 1,590 stocks on the BSE traded higher, but this was overshadowed by 2,343 stocks closing lower, emphasizing the market's struggle for traction.
Despite the current downturn, there are glimmers of hope. The October Purchasing Managers' Index (PMI) data indicates growth, albeit at moderate levels, showing the composite index at 58.6 and manufacturing at 57.4. While these numbers suggest some robustness within the economy, many market analysts point out the mixed signals—especially with the upcoming US elections and its potential fallout on global markets adding to the uncertainty.
Experts remain guarded about future trading strategies. Deepak Jasani, Head of Retail Research at HDFC Securities, advised maintaining caution due to the consistent selling pressure which seems to have receded somewhat, and hinted at possible upward corrections if buying interest returns. A compromise between buyers and sellers may be necessary for the market to find balance. For now, the resistance levels for the Nifty appear around 24,600, with support set at 24,196.
Leading the morning sessions were several banking and financial shares, indicating potential growth areas. Investors are advised to adopt what's described as a "sell on rally" tactic until more significant bullish signals are observed, especially considering current global market volatility. Yet, as always, those willing to assess risks could find opportunities, particularly with upcoming festive demands rumored to invigorate certain sectors.
What remains clear is the market’s current dynamics, marked by persistent selling pressures and mixed signals from global counterparts. How players navigate this uncertain terrain will dictate the immediate future of Indian equities going forward. Analysts and investors are, as always, watching closely—waiting for either reaffirmation or reassessment of their strategies based on upcoming earnings and economic data.
Looking beyond the immediate future, as India begins to pick up on its seasonal consumption patterns, some industry watchers are cautiously optimistic about potential rebounds, hoping the investment climate will settle. Yet, transitioning from the bear to the bull phase will require both domestic institutions and foreign investors to find common ground as they assess their positions and strategies below the hazy clouds of uncertainty. Until then, the looming figures around revenue growth and external dynamics will continue to dictate the mood on D-Street.
