The Nifty index rose by 158 points after six consecutive days of decline but is below 5.7% in the last month. The volatile market remains weak due to FIPA selling shares worth Rs 3,228 crore compared with Rs 1,401 crore by domestic institutional investors. Outflows in FII have reached a record high this month, the highest since the outflow recorded in March 2020, with a total outflow of around ₹1 lakh crore.
Market analysts attributed the sell-off to high valuation issues in the Indian market and ever-looming uncertainties for FY25. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said these factors may still prevail despite such a robust and sustained rally for the short term. Analysts have also recommended that although Indian equity may experience cyclical movements, it can still revive and grow as long as there is constant domestic investment.
October has marked one of the most challenging pre-Diwali periods for Indian equities in a decade. The Nifty index has declined nearly 6% this month, and the Sensex has dropped over 4,800 points, marking a 7.76% decrease since September. Analysts note that this is the largest monthly loss for the Nifty index since the COVID-19 market crash, surpassing even 2015’s 4.45% drop, previously the highest pre-Diwali decline in recent years.
The October sell-off has been compounded by weak Q2 FY25 corporate earnings, with projected 5-7% revenue growth for Indian companies, marking the slowest growth rate in 16 quarters. Market sentiment has shifted, focusing on quality over momentum as FIIs adopt a "sell on rallies" approach. Meanwhile, domestic institutional investors (DIIs) have absorbed some pressure, counteracting the impact of FII sales.
With the Diwali season underway, many investors are hoping for a recovery as, historically, Indian markets tend to perform well during this period. However, the broader market correction is anticipated to persist in the short term. Market experts advise monitoring key support levels for the Nifty at 23,900 and 23,500, which are expected to provide interim stability amid fluctuating investor sentiment. While an immediate turnaround remains uncertain, the market could enter a consolidation phase leading into 2025.
The Reserve Bank of India's stable interest rate policy and a forecasted GDP growth rate of 7.2% for FY25 offer long-term optimism. Analysts predict that sectors like consumption, FMCG, infrastructure, and manufacturing may drive market resilience once global inflation and interest rates moderate. Furthermore, as earnings growth shows signs of recovery, the Nifty index may reclaim previous highs in the coming months, provided domestic and retail investor confidence holds firm.