The Indian stock market experienced its steepest decline of 2024, primarily due to disappointing quarterly earnings from corporations, rising inflation concerns, and foreign investors shifting their focus to opportunities in China. Market analysts suggest that the domestic market is entering a difficult phase, with various factors set to impact investor sentiment.
In the fourth week of October, investors will monitor several key market drivers, including the upcoming Q2 FY25 earnings reports for July-September, geopolitical tensions in the Middle East, foreign fund outflows, crude oil prices, and both domestic and global macroeconomic data. Global market trends will also play a crucial role in shaping investor sentiment.
The Indian stock market marked its third consecutive week of decline as the corrective phase persisted. The Nifty 50 fell to its lowest level since August, closing the week at 24,854, a decrease of nearly 0.50 per cent from the previous week. Meanwhile, the Sensex experienced a decline of approximately 0.20 per cent, concluding the week at 81,224.75. These trends reflect ongoing market volatility and investor caution amid various economic pressures.
In addition to lacklustre earnings, the week was marked by a significant outflow of foreign funds from India as investors redirected their focus to China. The decline in Indian indices was primarily driven by heavyweights in the market and rising retail inflation figures, which heightened expectations of a delayed rate cut by the Reserve Bank of India (RBI). Retail inflation in India surged to 5.49 per cent in September, up from 3.65 per cent in August, significantly exceeding D-Street estimates of around 5 per cent.
For the week, the BSE benchmark fell by 156.61 points, or 0.19 per cent, while the Nifty dropped 110.2 points or 0.44 per cent. Although the benchmark indices initially displayed some signs of recovery, ongoing foreign fund outflows and disappointing earnings weighed heavily on sentiment, ultimately shifting the market bias to negative.
“A sustained selling pressure from FPIs muted Q2 earnings expectations, and elevated valuations acted as a headwind for the market. Insipid demand and volatility in input prices are the hindrances of a slowdown in earnings during the quarter,” said Vinod Nair, Head of Research at Geojit Financial Services.
“We expect the investment strategies favouring China over India may tactically support for the short term. However, the long-term outlook for the domestic market remains robust, with stability in growth and a pickup in capex,” he added.
A recovery in major banking stocks during the final session helped mitigate some losses, though the frontline indices still finished lower. Sector performance was mixed; banking, financials, and real estate saw decent gains, while the auto, metals, and FMCG sectors were the biggest laggards. The broader indices mirrored this trend, with the midcap index declining by nearly 1 per cent while the smallcap index closed just slightly in positive territory.
This week, the primary market is set for significant activity, with several new initial public offerings (IPOs) and key listings planned across both the mainboard and small and medium enterprises (SME) segments. It will be a crucial week from both domestic and technical perspectives as investors closely monitor corporate earnings, global market trends, and macroeconomic data.