Indian stocks largely suffered in October, owing to a combination of factors including the ongoing Israel-Palestine war, foreign portfolio investor (FPI) outflow, surging US bond yields, and a strengthening US dollar.
Apart from large-cap stocks, mid-and small-cap stocks also took a beating in October, marking a significant reversal from the positive momentum experienced over the previous six months, starting from April through September.
In addition, the Q2FY24 earnings season also added volatility to the market as major Indian IT companies, including TCS, Infosys, and Wipro, reported September numbers below the Street estimates and also trimmed their revenue guidance.
FPIs extended their selling streak in October, withdrawing ₹20,300 crore from Indian equities (till October 27) on the back of spiking US Treasury yields. September marked the beginning of FPIs turning into net sellers, withdrawing ₹14,768 crore from Indian Equities.
This shift occurred following a period of sustained buying that commenced in March and continued till August. During this bullish phase, FPIs infused a substantial ₹1,68,179 crore into Indian equities, as per the depositories data.
The Nifty 50 tumbled 2.84% in October, marking the largest monthly drop in CY23. From its all-time high of 20,222 points, the index is currently down by 6.04%.
35 Nifty stocks ended October in the negative territory. Among these, 17 stocks, including UPL, Divi’s Laboratories, Tata Steel, Tech Mahindra, Adani Enterprises, Adani Ports & SEZ, Asian Paints, JSW Steel, Apollo Hospitals Enterprise, Axis Bank, Wipro, Hindalco Industries, Mahindra & Mahindra, Infosys, TCS, SBI, and NTPC, saw losses ranging from 4% to 12.3%.
On the other hand, 15 stocks, including Nestle, Coal India, Bajaj Auto, SBI Life Insurance Company, HCL Tech, Tata Consumer Products, Ultratech Cement, Bajaj Finserv, Titan Company, Power Grid Corporation, Cipla, HeroMoto Corp, IndusInd Bank, BPCL, and HUL, recorded gains within the range of 0.8% to 7.7%.
In terms of sectoral indices, Nifty PSU Bank dropped 6.16% in October, registering the largest monthly drop since February 2023. The Nifty Metal also fell 5.66% in October, followed by Nifty Pharma and Nifty IT index, which tumbled 4.79% and 3.78%, respectively.
On the domestic front, the September CPI inflation number came surprisingly below expectations at 5.02% against 6.83% in August.
Volatility continues
Sreeram Ramdas, Vice President at Green Portfolio, PMS, said, “We are expecting Nifty 50 to showcase a subdued performance for the next one month. Looking at the sector exposure, it’s mainly towards financials and IT; on aggregate, it is around 51%.”
“Execution of the IT orderbooks is being postponed, which is being reflected in the IT sector’s results. As western companies cut back on spending, we expect IT to go through some stagnation. When it comes to financials, we have already seen net-interest margins peak, and they have started to come down,” he added.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “With the ground war in Gaza intensifying, the uncertainty surrounding the West Asian crisis is at its peak. Now we don’t know how and when this war will end and what the consequences will be. Therefore, investors should continue with a cautious strategy.
He said that the equity markets globally are being impacted more by the spike in US bond yields than the the Israel-Palestine war. The US 10-year bond yield above 4.9% will continue to be a major headwind for stock markets, particularly for those in emerging markets, he noted.
He further added that the sustained selling by FIIs is likely to continue weighing on markets. He points out that the sharp drop in Brent crude to $85 is a big positive for India, and expects that aviation, paints, and tyre stocks will respond positively to this news.
“Investors may watch the trends in high-quality largecaps like Maruti, ICICI Bank, HDFC Bank, RIL, ITC, and L&T, which have come out with good Q2 results. These companies have good earnings visibility and, therefore, will witness substantial institutional buying when normalcy returns,” he stated.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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