No Fireworks for Sensex This Diwali: Market Faces Major Downturn - Read Now
The Indian stock market, led by the Sensex and Nifty, is experiencing a downturn ahead of Diwali, with significant losses attributed to FII outflows and a shift in trading strategies. Analysts remain hopeful for long-term growth despite current challenges.
This Diwali, the Indian stock market is witnessing a notable downturn, with the Sensex losing over 4,800 points and the Nifty declining nearly 6% in the past month. October has proven to be particularly tough for investors, marking the worst performance since the Covid crash and the most disappointing pre-Diwali period in a decade.
As the market shifts its focus from momentum to quality, foreign institutional investors (FIIs) have withdrawn approximately ₹86,000 crore. Analysts suggest a shift in trading strategies, moving from buying on dips to selling on rallies. This trend is likely to persist until there's a clear improvement in consumption and earnings growth.
Historically, the Nifty has only experienced four instances of negative returns in the month leading up to Diwali since 2014, with an average return of just 0.84%. The worst pre-Diwali performance occurred in 2015 when the Nifty fell by 4.45%. This year, the market seems on track to surpass that record, with a current decline of 1.36%.
Despite these setbacks, domestic institutional investors (DIIs) have countered FII outflows with investments totaling ₹93,000 crore. Veteran investor Hemang Jani suggests that the stock market is nearing a bottom, although the timing remains uncertain. He anticipates a base formation in the coming weeks.
The market correction has hit smaller stocks particularly hard, with notable declines in companies like Cochin Shipyard, which has fallen 52% from its 52-week high. Analysts urge caution, particularly with stocks that have lower liquidity.
Amit Goel, Co-Founder at Pace 360, believes that the market usually shows a positive trend during Diwali, fueled by optimism and the corporate earnings season. Despite current challenges, UBS advises "buying the dip," as they view the slowdown in India’s growth and earnings as temporary. Christopher Wood from Jefferies maintains that India remains a highly attractive market for long-term investment, thanks to its robust earnings outlook.
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