Sluggish demand, rising competition, and high input costs have pressured margins in consumption-themed industries, prompting earnings downgrades, while unexpectedly high loss provisioning at a leading bank underscored the likely stress in unsecured loans that have lately been under the regulatory lens.
On Friday, the Sensex dropped 663 points, closing below the psychologically important 80,000 mark for the first time since August 14, while the Nifty fell 219 points to end the day at 24,181, breaking a key support level.
The banking sector led a widespread selloff, with the Nifty Bank index plunging 2.1% intraday before closing down 1.4%, driven by a nearly 20% decline in IndusInd Bank shares following a weak earnings report. Over the week, the Sensex has corrected by 2.4%, while the Nifty has fallen by 2.6%.Foreign portfolio investors (FPIs) sold shares worth more than Rs 3,037 crore on Friday alone, showed the provisional BSE data. That brings October’s outflow to an unprecedented Rs 96,362 crore.
“There has been a noticeable shift in sentiment—where once the market rewarded good news and largely overlooked setbacks, it now sharply penalises even minor earnings misses,” said Sanjeev Prasad, co-head, of Kotak Institutional Equities. “Until recently, investors believed gains could be made across the board regardless of valuations; however, this outlook has clearly changed.”
India VIX, or the fear gauge, saw a sharp rise this week, climbing 9.3% to 14.63, reflecting increased market volatility. Selling pressure was intense in midcap and smallcap stocks, with the Nifty Microcap 250 index plunging 8.5% and the Nifty Midcap 100 and Smallcap 100 indices each falling over 6% for the week.
All sectoral indices closed in the red except for Nifty Financial Services. Nifty Realty led the declines with a 6.5% drop, followed closely by Nifty Oil & Gas, which shed 6.4%.
Friday’s trading reflected negative market breadth, with only 841 stocks advancing while 3,101 declined, underscoring a cautious investor stance and a prevailing bearish sentiment. Analysts do not expect equities to bounce back soon.
‘ZERO TOLERANCE’
“Earnings this season are being compared to a high base from last year and have shown limited growth as demand momentum remains subdued. Even slight earnings misses have triggered sharp market reactions, reflecting heightened sensitivity,” said George Thomas, fund manager, equity, Quantum AMC. “Retail inflows may face pressure in this environment, with investors potentially waiting for more favourable entry points. Given the current valuations, we do not anticipate any significant upward moves in the near term.”
Overseas funds sold heavily across emerging markets in October, with India showing the biggest impact. While outflows from India exceeded $12 billion, South Korea saw $1.7 billion in sales, and Thailand around $600 million. In contrast, Japan experienced an inflow of $12.6 billion, while Taiwan and the Philippines saw inflows of $1.7 billion and $77 million, respectively.
On a weekly basis, most technical indicators signalled that the bears have firmly taken control of the market, said analysts.
“The decline in the long-short ratio from 80% to 32% along with selling by FIIs indicates continued bearish pressure in the market,” said Chandan Taparia, head, equity derivatives & Technicals, Motilal Oswal Financial Services. “Overall, as per price structure, until the Nifty holds below 24,700 zones, any bounce could be sold for the downside target toward 24,100 zones.”
