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The Indian stock markets experienced a decline on November 4, driven by sustained foreign investor selling and weaker-than-expected earnings for the September quarter. The Sensex, a benchmark index, fell by 1.2 percent or 942 points to close at 78782.24, while the Nifty, another key index, dropped by 1.27 percent or 309 points to settle at 23995.35. This downward trend extended to broader indices, with the BSE MidCap and SmallCap indices experiencing declines of 1.3 percent and 1.65 percent, respectively.
October witnessed a period of pressure on local equities due to geopolitical tensions and elevated valuations. During this time, foreign investors withdrew a substantial amount exceeding Rs 95,000 crore from Indian markets. Conversely, domestic investors demonstrated a positive sentiment, contributing net purchases exceeding Rs 1 lakh crore. However, the ongoing selling pressure from foreign investors and the disappointing earnings performance have dampened investor confidence, leading to the recent market decline.
Looking ahead, investors are likely to remain cautious in the coming days as they navigate through several significant events, including the US elections and the Federal Reserve's policy meeting scheduled for this week. Analysts anticipate the Fed to announce another 25 basis point rate cut on November 7. However, the market's focus will be intently directed towards Fed Chair Jerome Powell's guidance on potential pauses in the rate-cutting cycle. This is particularly relevant considering recent strong economic data that could potentially influence the Fed's decision-making process.
Vinod Nair, Head of Research at Geojit Financial Services, highlighted that India's underperformance compared to its global peers is attributed to high valuations. He further emphasized that the ongoing selloff has been intensified by weak second-quarter earnings, further dampening investor sentiment. Nair anticipates continued volatility in the short-term, with attention shifting towards the closely contested US presidential election. Moreover, key economic events, such as the US Fed and Bank of England's policy decisions, will play a pivotal role in shaping future market movements.
Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas, provided technical insights into the Nifty's performance. He noted that the index opened flat but experienced a sharp decline during the first half of the trading session. While a slight pullback was observed in the latter half, the Nifty ultimately closed the day in the red, down approximately 309 points. Analyzing the daily charts, Gedia observed a breakdown of the five-day consolidation range, suggesting a resumption of the downward trend. He expects the Nifty to potentially drift towards the 23600 – 23650 zone, where the 40-week average is situated. On the upside, crucial resistance is positioned at 24368.
Gedia also provided insights into the Bank Nifty's performance, which experienced a sharp decline but remained within the 52000 – 51000 range. He anticipates the Bank Nifty to trade within a range of 52500 – 50500 with a negative bias. Key support is placed at 50720 – 50600, while resistance is situated at 51750 – 51800.
Ankita Pathak, Chief Macro and Global Strategist at Angel One Wealth, provided an overview of the US economic outlook and its potential impact on the Federal Reserve's policy decision. She anticipates the Fed to deliver a 25bps rate cut this week. While the US economy has shown resilience exceeding previous expectations, Pathak believes the week ahead will be characterized by crucial macroeconomic data releases that will influence the Fed's decision-making process.
Pathak highlighted that October's employment report will reflect the impact of the Boeing strike, layoffs at its suppliers, and Hurricane Milton, which could potentially distort macroeconomic numbers. Despite these factors, she believes the US is on track for a soft landing, combining adjusted macroeconomic data releases with corporate earnings. She emphasizes that front-loading rate cuts will be beneficial as inflation subsides, particularly given the contraction in leading indicators of US inflation such as shelter and rent indices.
In conclusion, the Indian stock market experienced a decline driven by sustained foreign investor selling and weak earnings. Investor sentiment remains cautious as the market navigates through significant events, including the US elections and the Federal Reserve's policy meeting. While the Fed is anticipated to deliver another rate cut, its guidance on potential pauses in the rate-cutting cycle will be closely watched. Overall, the market is expected to face volatility in the short-term, with the US economic outlook and global events playing a crucial role in shaping market trends.
Source: Taking Stock: Sensex, Nifty fall over 1% as FII selling continues, weak earnings weigh