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Indian stocks faced a challenging October as disappointing corporate earnings and foreign investor outflows dampened market sentiment. The BSE Sensex and NSE Nifty indices witnessed a volatile month, with sectors like IT, financials, and consumer goods feeling the pressure from underwhelming quarterly results.
Since its all-time high on 26 September, the Indian benchmark index Sensex had fallen by 8.2% by 4 November, underperforming other major Asian markets.
Corporate earnings fell short of analyst expectations, primarily in consumer-facing and technology sectors. Several large-cap companies, including IT majors, reported weaker-than-expected earnings growth, citing slower global demand and rising operational costs. This slowdown in earnings impacted investor confidence, raising concerns over the sustainability of India’s growth trajectory in the near term.
In tandem, foreign institutional investors (FIIs), who had been instrumental in propping up Indian markets earlier in 2024, turned net sellers in October. Rising global interest rates and uncertainties over the US Federal Reserve’s stance on future rate hikes prompted a shift in capital flows. The strengthening US dollar further compounded outflows, as currency volatility raised the risks for foreign investors holding rupee-denominated assets.
Domestically, inflationary pressures persisted, affecting sectors sensitive to consumer demand, like autos and Fast-moving consumer goods (FMCGs). Rising input costs due to high crude oil prices impacted corporate margins, and the Reserve Bank of India’s cautious stance on rate cuts added to the cautious outlook.
Looking forward, analysts suggest that Indian equities may face further headwinds if corporate earnings do not improve in the coming quarters.
Nomura sees India’s economy entering a cyclical growth slowdown. The financial services company indicated that leading growth indicators suggest a further slowdown in GDP growth and expressed that the Reserve Bank of India’s forecast of 7.2% for FY25, ending in March 2025, may be overly optimistic. The firm also highlighted increasing downside risks to its own GDP growth projections of 6.7% for FY25 and 6.8% for FY26.
Editorial Note:
This article was written with the assistance of AI. A human editor reviewed and refined the text for accuracy and quality before publication.
