The Indian stock market started October on a significantly negative note, as widespread selling pressure swept through Dalal Street, triggered by poor global market cues. This abrupt downturn led to the domestic indices breaking their three-week streak of gains. Analysts attribute this decline to fundamental challenges in the market, which led to short-term profit-taking by investors.
As we move into the second week of October, market participants are keenly observing crucial triggers that could influence the market’s direction. Some of these include the Reserve Bank of India’s (RBI) upcoming Monetary Policy Committee (MPC) meeting, the initial earnings reports for the July-September quarter (Q2FY25), geopolitical developments such as the Israel-Iran conflict, foreign fund outflows, crude oil price fluctuations, as well as both domestic and international macroeconomic indicators.
Also Read: Strategies to navigate the worst week for Nifty 50 and Sensex in two years amidst heightened volatility due to ongoing geopolitical tensions.
Domestic equity benchmarks, including the Sensex and Nifty 50, continued to plunge for the fifth consecutive session in extremely volatile conditions, marking their worst week in over two years due to geopolitical tensions and foreign capital outflows. The selling pressure was widespread, affecting nearly all sectors as the overall market breadth skewed towards declines.
During the recent week, frontline indices suffered a loss of approximately 4.5%, marking their most significant decline since June 2022. Following a remarkable performance over the previous three weeks, the benchmarks witnessed a drop of over 5% from their record highs recorded on September 27.
The 30-share BSE Sensex fell by 808.65 points (or 0.98%), settling at 81,688.45, which is a three-week low. Concurrently, the NSE Nifty 50 lost 235.50 points (or 0.93%) to end at 25,014.60. Over the span of just four trading sessions, Sensex experienced a staggering fall of 3,883.4 points (4.6%), while Nifty 50 dropped by 1,164.35 points (4.5%), marking its worst performance in the last two years.
Also Read: Understanding the reasons behind the recent stock market crash and its implications for the Nifty and Sensex.
The bearish sentiment in the market was fueled by escalating tensions in the Middle East, which have consequently driven up crude oil prices amidst supply disruption fears. Compounding these issues, persistent foreign capital selling raises concerns of a potential fund shift to China, following recent announcements of significant stimulus measures aimed at reviving its economy, thus further dampening market sentiment in India.
Notably, the India VIXโan indicator of market volatility expectationโrose by 18.10%, closing at 14.12 for the week. However, broader indices exhibited relatively better performance, with declines ranging from 2.5% to 3.2%, showcasing the pressure predominantly facing large-cap stocks.
The recent market decline was broad-based, with all major sectors closing in the red except for metals. The real estate, automotive, and energy sectors were among the hardest hit. Over just five trading sessions, Indian stock markets witnessed a dramatic decrease in investor wealth, erasing approximately โน13 lakh crore.
Also Read: Evaluating the implications of recent market events on investment strategies.
Market analysts are predicting a week of consolidation ahead, driven by ongoing tensions in the West Asia region. With the earnings season starting, specific stock movements are expected as attention shifts to interest-sensitive stocks in light of the upcoming RBI policy meeting. Although a rate cut remains unlikely, the statements made during the meeting will be closely scrutinized for potential implications.
This weekโs primary market is expected to see moderate activity, with several initial public offerings (IPOs) and important listings lined up across the mainboard and small and medium enterprises (SME) segments. Investors are set for a year-end review as corporate results, global markets, and macroeconomic data take the spotlight.
Key Triggers for Stock Markets:
Q2 Results
One of the major upcoming events is the release of corporate earnings for the July-September quarter (Q2FY25). Tata Consultancy Services (TCS), a leading software services provider in India, is anticipated to lead the earnings season on October 10. Investors will be closely analyzing these results for potential impacts on market sentiment.
Also Read: Details on TCS’s Q2 performance, including considerations for its second interim dividend for FY25.
Market analysts note that the rise in oil prices, driven by escalating tensions in the Middle East, is likely to introduce input cost inflation, adversely affecting earnings visibility for domestic companies. Industries such as paint, which rely heavily on crude oil derivatives, may be particularly impacted.
However, expectations of demand recovery in the latter half of FY25 may present an opportunity for accumulation in related stocks. The market is likely to undergo a consolidation phase as the valuation remains elevated, compelling investors to adopt a cautious approach and consider a sell-on-rally strategy.
RBI MPC Meeting
This week marks the deliberation period for the Reserve Bank of India’s Monetary Policy Committee (MPC), which will convene from October 7 to 9. The outcome of these discussions will be disclosed on October 9 at 10 a.m. It is anticipated that the RBI will maintain the current repo rate of 6.5%, a stance it has held steady since February 2023.
Also Read: Insights into India’s current foreign exchange reserves and their impact on market stability.
Market volatility is expected in the lead-up to the MPC’s decision, with particular attention being paid to banking stocks sensitive to interest rates. Analysts are largely expecting the RBI to uphold its position in light of its goal to maintain inflation near target levels, even as the US Federal Reserve recently issued its first significant interest rate cut in four years.
Any signals of potential future rate cuts in the RBI’s commentary have the potential to uplift market sentiment amid global uncertainties. Overall, the central bank is expected to keep the benchmark rate steady, aligning with current market expectations, as it aims to achieve an inflation rate near its medium-term target of four percent while also fostering economic growth.
Upcoming IPOs and Listings
The primary market will see activity from Garuda Construction and Engineering, which is scheduled to open for subscription on October 8. Additionally, while the Hyundai Motor IPO and Afcons Infrastructure IPO are expected to open for bidding soon, their exact dates have not been finalized yet. In the SME segment, Shiv Texchem’s IPO will also open for subscription starting October 8.
Foreign Institutional Investor Activity
In terms of market dynamics, foreign institutional investors (FIIs) shifted to a net selling position, offloading approximately โน40,511.50 crore in the cash segment. In contrast, domestic institutional investors (DIIs) maintained their buying momentum, purchasing around โน33,074.39 crore during the same period.
Also Read: Factors prompting FPIs to sell off their holdings in Indian markets.
Foreign portfolio investors (FPIs) have switched to net sellers in October, reversing a three-month trend. This shift comes against a backdrop of geopolitical tensions and follows a period of increased FPI activity in September, where inflows peaked year-to-date and reached a nine-month high.
Market experts opine that FPIs are reallocating funds away from India due to perceptions of an expensive valuation environment, opting instead for China, where an anticipated economic revival is in progress. This optimism was catalyzed by recently announced monetary easing by the People’s Bank of China (PBoC), which included cutting interest rates and decreasing the reserve requirement ratio.
Global Cues Impacting India
The reallocation of global funds to China following significant monetary stimulus has instigated broad selling pressure in emerging markets, including India.
Increasing geopolitical tensions, particularly after Iran’s missile launch towards Israel, further exacerbated negative market conditions, dampening investor sentiment significantly.
Investors remain cautious as they brace for potential retaliatory measures from Israel, specifically targeting Iranโs nuclear capabilities or prominent oil facilities. The recent uptick in oil prices, surpassing 11% within the week, has reignited inflation concerns, which may undermine optimism about prospective global interest rate cuts.
Market participants are closely monitoring both geopolitical developments and their impacts on crude prices in the coming weeks. The trends in foreign fund flows alongside domestic institutional movements will remain critical to market dynamics. Notably, the resilience of US markets despite rising volatility could signal a recovery in Indian markets as well.
Oil Prices and Market Reactions
Global crude oil prices witnessed significant increases, marking the largest weekly gain in over a year amid fears of a broader conflict in the Middle East involving Israel and Iran. However, constraints on these price hikes were noted as US resistance discouraged Israel from targeting Iranian oil infrastructures.
Brent crude futures increased by 43 cents (0.6%) to settle at $78.05 per barrel, while US West Texas Intermediate futures rose by 67 cents (0.9%) to close at $74.38. Throughout the week, Brent crude gained over 8%, representing the most substantial weekly increase since January 2023.
Corporate Actions
In the coming week, several major companies will trade ex-dividend, including Jupiter Wagons Ltd, K.P. Energy Ltd, and Shraddha Prime Projects Ltd. Additionally, some stocks will also undergo ex-bonus and ex-split trading. It is essential for investors to track these actions as they may significantly influence stock prices.
Technical Analysis of Market Trends
Technically, the Nifty index’s recent sharp decline has erased gains made over the prior two weeks, breaching multiple short-term moving averages and a rising trendline. The surge in India VIX points to heightened market participant anxiety, indicating that further downside in the index remains a distinct possibility.
Next support levels for the index are at 24,750, with significant support at 24,350 (100 DEMA). Should recovery occur, resistance is anticipated around the 25,500-25,800 range.
Sector-wise analysis indicates that IT, pharmaceuticals, and metals show a degree of relative strength; however, other sectors may experience continued profit-taking. Traders are advised to limit long positions and consider shorting weaker sectors until the Nifty decisively reclaims the 25,600 level.
Bearish signals on the weekly chart for the Nifty point to strong selling at higher levels. The breakdown below key Fibonacci support at 25,100 and a negative weekly close indicate potential further declines, with the next critical level at 24,700.
A fall below this support could see declines toward 24,400. Conversely, a close above 25,300 could rejuvenate bullish sentiment and drive the index toward 25,700. Given enhanced market volatility, traders should approach with caution and take advantage of potential buying opportunities at critical support levels.
Disclaimer: The insights provided in this analysis represent the views of individual analysts or brokerage firms and not necessarily those of the publishing platform. We recommend that investors consult certified experts before making any investment decisions due to the rapid shifts in market conditions that may affect individual circumstances.
