October 2024 reminds us of the market turmoil caused by the coronavirus pandemic. The Nifty 50 index, the benchmark Indian stock market, suffered its biggest decline since the March 2020 crash. The Nifty 50 index has fallen 6.32% so far in October. In just 19 trading sessions, it has fallen 8% from its all-time high of 26,277.35 hit on September 27th.
This recent decline has resulted in 35 index constituents trading between 10% and 39% below their most recent one-year highs, according to Trendlin data.
The reason behind the crash is obvious. Massive selling by foreign portfolio investors (FPIs) due to soaring market valuations, disappointing second-quarter results in India, geopolitical tensions, and expectations for aggressive interest rate cuts from the US Federal Reserve (Fed) The weakening of the stock market is weighing on the market overall.
In a record move, FPIs withdrew more than Rs 1 billion from Indian financial markets in October alone. The scale of the outflow was not seen during the COVID-19 crash or the 2007-2008 global financial crisis.
Also Read | Nifty’s 5% drop in October marks worst monthly sales since coronavirus market crash
“Indian markets have been declining all day, reeling from FPI selling pressure, weak Q2 results for most companies and rising US government bond yields. Selling pressure among FPIs needs to be reversed.”Sentiment among the local investor community has also stabilized to some extent,” said Deepak Jasani, head of retail research, HDFC Securities.
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Mint reached out to experts to understand the drivers of this market downturn and glean advice for investors during this volatile time. Here’s what they had to say:
Sneha Poddar, VP – Motilal Oswal Financial Services, Research and Wealth Management
This is a healthy correction after a very long period of time. FIIs have sold nearly Rs 1,000 crore so far in October, with a shift towards China’s stimulus announcements and premium domestic market valuations.
Earnings for Q2 FY25 are also not very encouraging, with growth across key windows slowing.
For now, the focus will continue to be on revenue growth and valuation.
State elections, like the US election in November, could create instability going forward.
“Instead of focusing on indexes, investors should take a stock-specific approach and look for sectors and stocks with strong performance and reasonable valuations,” Poddar said.
“The long-term outlook remains positive, so this correction should be viewed as an opportunity to gradually build a high-quality long-term portfolio,” Poddar said.
Please also read |The market crash is getting more serious! Nifty50 falls 6.5% in October: What should investors do?
Gaurav Arora, Equilus Fund Manager
How you should approach investing in stocks at this point is more of a behavioral question.
“Investors need to be aware of their investment horizon. If you have a horizon of three years or more and don’t suffer from intermittent fluctuations in the stock market, put most of your investable surplus into a mutual fund or investment fund, if possible. It is the best time to invest in stocks through PMS,” Arora said.
While the broader index corrected by single-digit percentages, some segments of the market saw significant declines, resulting in excellent selection opportunities that good fund managers can take advantage of.
“If you are upset by market volatility, it is better to invest systematically, but stick to blue-chip stocks and avoid very rich stocks with uncertain returns and valuations. There are questions about corporate governance. From a long-term perspective, India’s growth story remains a great one and the recent downturn presents a good opportunity to buy into it,” Arora said.
Sandeep Raina, Executive Vice President, Research, Nuvama Professional Client Group
This was expected given the slowdown in revenues (+4% Q1 FY25, +20% CAGR FY20-24) and attractive valuations in China compared to India, especially for FPIs.
“In the current context, we are focusing on specific sectors that have underperformed over the past two to three years and have much higher growth potential than the broader market, such as IT services, hospitals, jewelery accessories and telecommunications agencies. We recommend acquiring ‘positive cash flow,”’ Raina said.
Vinod Nair, Head of Research, Geojit Financial Services
Sustained selling by FIIs and lack of catalyst in the domestic market may impact near-term market sentiment.
Performance in the September quarter was most hampered by FMCG, metals, automobiles and real estate, affected by a weaker demand environment and margin pressure.
Meanwhile, IT remained relatively flat, contributing less to the overall loss due to a recovery in BFSI spending and a positive outlook for US spending.
“We expect consolidation to continue in the short term. A reversal of the trend will depend on a slowdown in FII selling intensity and the outcome of the US presidential election,” Nile said.
Domestic macroeconomic conditions are generally in the market’s favor, with strong PMI data being announced and the RBI reiterating its economic growth forecast for FY2025.
“Easy valuations, earnings recovery in H2 FY25 and expectations of RBI rate cut in 2025 will support the market. Sectors to watch include consumption, FMCG, infrastructure, new generation Corporate, manufacturing, chemistry,” Nile said.
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Disclaimer: The opinions and recommendations expressed above are those of individual analysts, experts, and brokerages and not of Mint. We encourage investors to consult certified professionals before making any investment decisions.
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