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The Indian stock market is experiencing a significant sell-off, with the Nifty 50 index plummeting by 8.3% from its recent peak, driven by weak September quarter results across various sectors. The index, which represents the top 50 blue-chip companies in India, has fallen to its lowest level since mid-August, marking a significant correction from its September high. This downturn has been particularly pronounced in October, with the index experiencing a decline of 6.60%—its largest monthly drop since March 2020. Notably, this sell-off is largely confined to Indian equities, while Asian markets continue to rise and U.S. markets are hitting record highs.
The sell-off has impacted numerous Nifty 50 constituents, with 35 stocks trading between 10% and 39% below their recent one-year peaks. IndusInd Bank leads the decline, down 39% from its high, followed by Adani Enterprises, which is 28% below its peak. The slump in IndusInd Bank's stock is attributed to disappointing September quarter results, which led to a significant intraday drop. Adani Ports & SEZ also saw a considerable drop, trading 18.73% lower than its recent highs.
Tata Motors has been particularly affected, experiencing a downward spiral for the past two months, with the stock down 27% from its recent peak. The decline is attributed to persistent drops in sales volume and a cautious outlook from analysts regarding falling demand for passenger vehicles. Other Tata Group stocks, including Tata Consumer Products, Tata Steel, Titan Company, and Trent, have also seen significant corrections. Additionally, carmakers like Maruti Suzuki and Mahindra & Mahindra have faced significant drops, while two-wheeler manufacturers such as Bajaj Auto and Hero MotoCorp are also trading at substantial discounts. The FMCG sector has been particularly hard hit, with Nestlé India and Hindustan Unilever experiencing sharp corrections after their September quarter earnings, and the sector as a whole declining by 10% in October—its largest monthly drop since 2008.
The primary driver of the Indian market's weakness lies in the weak September quarter results reported by companies across key sectors. FMCG companies have been affected by a slowdown in rural consumption, leading to earnings below estimates. Banks are facing challenges with high slippages and deteriorating asset quality, which has unsettled investors. Auto companies are also grappling with slower sales growth, particularly in the car sector, with subdued projections for the upcoming festive season further dampening investor sentiment. However, the IT sector is showing signs of positive momentum, with demand from key markets like the U.S. and Europe gradually recovering and central banks easing interest rates. Strong earnings from global investment banks, a major revenue source for IT companies, have also boosted investor sentiment.
The market sell-off has also been fueled by foreign portfolio investors (FPIs) withdrawing a record ₹97,205 crore from the Indian market in October—the largest monthly outflow on record. This withdrawal is attributed to weak earnings and Chinese stimulus measures. Other factors contributing to the market's weakness include rising tensions in the Middle East, fading hopes for a significant rate cut by the U.S. Federal Reserve, extreme valuations, a strong rebound in Chinese stocks, and uncertainty surrounding the upcoming U.S. election. Despite these challenges, there are some positive signs, including the gradual recovery in demand from key markets in the IT sector and the easing of interest rates by central banks, which could provide some stability in the market.
Source: Sharp Cuts! 70% of Nifty50 stocks tumble over 10% from recent highs as selloff intensifies