Domestic stock markets tumbled sharply on Monday as the S&P BSE Sensex plunged more than 1,100 points in morning trade, pressured by persistent foreign outflows and mounting global and domestic economic worries.
Around 10:30 am, the NSE Nifty50 declined 357.80 points to 23,946.55, while the S&P BSE Sensex dropped 1,121.16 points to trade at 78,602.96. As investor fears grew, midcap and smallcap equities saw sharp declines as the trend spread to wider market indices.
The market’s recent decline was mostly caused by foreign portfolio investors (FPIs), who sold equities for a record-breaking Rs 1,13,858 crore in October—the largest monthly outflow ever recorded.
Concerns over India’s high valuations and more dire earnings prospects have contributed to the ongoing FPI sell-off, which has caused benchmark indices to drop by almost 8% from their previous highs.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: “The Indian market is facing headwinds from decelerating earnings growth. Nifty’s FY25 EPS growth, as indicated by Q2 results, may dip below 10%, making current valuations of 24 times estimated FY25 earnings difficult to sustain. FPIs may continue to sell in this difficult earnings growth environment, limiting any market rally.”
Investor morale is being impacted by the big downgrades in profit predictions for major Nifty firms. With a 34.3% drop since Q2 results, BPCL announced the biggest cut to its FY25 EPS predictions. IndusInd Bank, UltraTech Cement, and Coal India came next.
Motilal Oswal Financial Services (MOFSL) analysts pointed out that although 34 Nifty stocks recorded a moderate 5% increase in revenue for Q2, net profit growth stalled and EBITDA growth was only 1%.
Furthermore, poorer Q2 performance—many businesses missed PAT and EBITDA estimates—contributed to worries about domestic profitability.
Investors are becoming more cautious as a result of this trend, questioning the sustainability of values in the face of declining corporate growth predictions.
Global Factors at Play
The volatility has been compounded by international considerations, especially the forthcoming November 5 US presidential election. Due to the uncertainty surrounding the election’s outcome, markets throughout the world are tense. Although its sustainability is yet unknown, analysts predict that a Trump victory may spark a brief rise, while a Democratic victory might result in further short-term market corrections.
According to Emkay Global, a 5% correction in Indian markets, triggered by a Democratic sweep, may offer a buying opportunity, although neither scenario would affect the country’s medium-term prognosis.
Oil prices increased 2% on Monday to $74 a barrel, adding to the burden, as OPEC+ postponed its planned output boost to ease supply worries amid rising Middle East tensions, especially between Iran and Israel. India is a significant energy importer and this increase in crude prices has raised concerns about growing import expenses, which might worsen inflationary pressures at home.
Additionally, the rupee has been under pressure, trading at its all-time low of 84.1 against the dollar. A declining rupee may result in more FPI withdrawals as investment returns decline, which would further affect the stock market. The loss of the rupee may put further pressure on India’s foreign exchange reserves, analysts warn, particularly given the growing cost of energy imports.
Analysts predict an uncertain future for the Indian market. Despite structural growth advantages over other developing countries, Emkay Global advises that India’s investment strategy may need to adjust to the impending time of increased inflation and growth uncertainty globally.
Nonetheless, Dr Vijayakumar suggested that investors “remain invested in fairly valued large-caps is the safer option during this volatile phase.”
Long-term investors are keeping an eye on important structural changes in the Indian economy, even if the market may experience short-term volatility owing to both local and international causes.
Also Read: Thirty-Six Dead in Bus Accident in Uttarakhand’s Almora
