New Delhi: This month there has been a huge decline in the stock market. Foreign investors have sold shares heavily. The quarterly results of the companies have also not been as per expectations. Due to this, the month of October is proving to be the worst for the stock market after the year 2020. The trend of decline in the stock market continued for the fourth consecutive day on Thursday. This fall has made investors sweat. So far in October, the Sensex has fallen by about 5%. This decline is more than the 4.58% decline that occurred in June 2022. The biggest decline in recent years was seen in February and March 2020 during the time of Covid. Then Sensex had fallen by 6% and 23%.
The total market capitalization of all companies listed on BSE has declined by Rs 29 lakh crore this month. However, domestic investors remain strongly invested in the market.
Dr. VK Vijayakumar of Geojit Financial Services says that in the current situation there is less possibility of a huge fall in the market. The reason is that domestic investors are strong enough to handle the market. But, a fall in the market is possible. We are seeing a correction in the market, which is mainly due to continued selling by foreign investors.
Who has become the villain for the market?
This month, foreign institutional investors (FIIs) have withdrawn about Rs 82,000 crore from the Indian market. This is by far the biggest sale by foreign investors in any one month. This is much more than the selling that happened during Covid.
Experts believe that if the Indian stock market was not trading at such an expensive level, then the selling by foreign investors would not have been so much.
The quarterly results of the companies have also not been encouraging. This has further weakened the market sentiment. Apart from this, money is also coming out of the market due to the raising of funds by companies through IPO and QIP of big companies like Hyundai India.
International tensions and uncertainty over the outcome of next month’s US elections are also making some investors cautious.
The growth in earnings of companies is expected to decline to around 10% in the financial year 2025. It was 26% in the financial year 2023-24. Nifty-50 companies’ profits are expected to grow only 2% year-on-year in the second quarter.
biggest warning
Quarterly results of many companies have been weaker than expected. Goldman Sachs has reduced its outlook on Indian stock markets from ‘overweight’ to ‘neutral’. He says high valuations and weak market sentiment may limit the market’s upside in the near future.
Analysts at Incred Equities have also reduced their target for Nifty by 3% to 25,978. He says that due to high valuations the market may continue to decline till December 2024 quarter.
Different viewpoint of some experts
However, Dr. Vijayakumar believes that companies’ earnings are expected to improve in the financial year 2025-26. Once earnings improvement becomes evident, the market may return to bullishness.
Many experts believe that the current decline is excessive and the market may soon rise. Gautam Shah of Goldilocks Premium Research said, ‘The market is gradually becoming oversold and I do not see more than 2%, 3%, 4% downside from here, while the possibility of upside is equally high. This is a good opportunity which should be taken advantage of.
Fund manager Gurmeet Chadha says that since a large part of the decline is not due to India-related reasons, the rise will also come very soon. In such a situation, it is important to invest in those companies where good earning potential is visible. The balance sheets of the companies are strong and the macroeconomic situation is also good. Despite this, we have not seen an improvement of 10% for a long time. Market decline is a common thing.
Chadha said, ‘Any decline is troubling, but this seems to be a little more troubling because it has come very fast.’
Despair prevails even today
Trading in the 30-share BSE Sensex remained light for the fourth consecutive session on Thursday. It closed at 80,065.16 with a decline of 16.82 points or 0.02 percent. The index rose to a high of 80,259.82 points during trading. While the bottom came down to 79,813.02 points. In volatile trading, National Stock Exchange’s Nifty also closed at 24,399.40 points with a decline of 36.10 points or 0.15 percent.
(Disclaimer: The recommendations given in this analysis are those of individual analysts or broking companies, and not of NBT. We advise investors to consult certified experts before taking any investment decision as stock market conditions change rapidly. Can.)