Indian equity markets extended their losses on November 5, as global uncertainties, particularly in the wake of the upcoming U.S. presidential election and the U.S. Federal Reserve’s monetary policy meeting, weighed heavily on investor sentiment. The benchmark indices – the Sensex and Nifty – remained under pressure as they opened in the red, reflecting the global risk-off mood.
Market Opening and Early Trends
At the start of the trading day, the Sensex was down by 237.53 points, or 0.30%, at 78,544.71. The Nifty followed suit, shedding 60.10 points, or 0.25%, to settle at 23,935.20. While the broader market showed some resilience with 911 advancing stocks compared to 854 declining stocks, the overall market sentiment remained bearish.
Among the prominent gainers on the Nifty were stocks like Hindalco, JSW Steel, Tata Steel, Nestle, and HCL Technologies, while the biggest losers were Coal India, Reliance Industries, Trent, Titan Company, and Bharat Electronics.
However, despite a few pockets of strength, the overall market direction appeared to be downwards as the concerns over global economic uncertainty persisted.
Major Factors Influencing Market Sentiment
U.S. Election and Fed Meet: A Global Cloud Over Markets
One of the key reasons behind the current caution in the markets is the ongoing uncertainty surrounding two major global events: the U.S. presidential election and the Federal Reserve’s monetary policy meeting. Investors are worried that any surprises from these events could lead to increased market volatility.
The U.S. presidential election, set to take place in a few days, is poised to be one of the most closely watched contests in recent history, with both parties presenting sharply divergent views on economic policy. Historically, election periods tend to bring heightened volatility in global markets as investors adjust their portfolios based on their expectations of the outcome.
Additionally, market participants are eagerly awaiting the outcome of the U.S. Federal Reserve’s meeting, with expectations of further interest rate hikes to tame persistent inflation. The prospect of tighter monetary policy in the world’s largest economy is likely to have spillover effects on emerging markets, including India, as foreign investors recalibrate their risk exposure.
Foreign Institutional Investors (FII) Selling Continues
Another major factor that has added pressure on the markets is the continued selling by Foreign Institutional Investors (FIIs). The relentless outflow of funds from Indian equities has been a key drag on the market, contributing to the ongoing downtrend. According to analysts, this FII selling is likely to persist for some time, as FIIs appear to be exiting the Indian market in favor of safer and more stable economies, particularly in light of the global economic uncertainties.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, believes that FIIs are continuing to offload Indian stocks due to weak earnings from domestic companies, compounded by global risks. “With two-thirds of Nifty 50 companies missing their earnings estimates in Q2, the Nifty 50 earnings for FY25 have been drastically revised down to less than 10% from the previous consensus of 15%. This has led to a revaluation of the market,” he said.
Vijayakumar added that the consistent FII selling is primarily driven by these earnings downgrades and overall global risk aversion. The prevailing market conditions, he noted, suggest that the FII sell-off could continue for some time, creating headwinds for the Indian market.
Domestic Earnings Miss Estimates
The corporate earnings season for Q2 FY25 has also been disappointing for investors, with several large-cap companies falling short of analysts’ earnings expectations. This has led to a downward revision of earnings growth projections for the upcoming quarters. In fact, for the current fiscal year, Nifty 50 earnings growth has been slashed to less than 10%, down from the earlier estimate of 15%.
The weak earnings performance has prompted concerns about the sustainability of current valuations, especially in a high-interest-rate environment. The combination of lower-than-expected earnings growth and rising global risks has created an environment where investors are increasingly risk-averse, opting for more conservative strategies or moving to cash and safer assets.
Sectoral Performance: Mixed Picture
While the overall market has been under pressure, there were certain sectors and stocks that showed resilience on November 5. Metal stocks, for instance, remained in the green, with companies like Hindalco, JSW Steel, and Tata Steel leading the Nifty gainers list. Analysts point to the firm global demand for metals and the sector’s relatively strong earnings growth as reasons for this outperformance.
Similarly, the FMCG sector also saw positive movement, with Nestle India making notable gains. On the other hand, sectors such as IT, energy, and consumer discretionary stocks continued to face significant headwinds, with Reliance Industries, Titan Company, and Bharat Electronics being among the worst performers of the day.
The ongoing volatility in the markets has resulted in a more selective approach from investors. Experts recommend focusing on stocks that are likely to outperform during periods of economic uncertainty. Companies with strong earnings visibility, sound fundamentals, and robust cash flows are likely to attract attention, while more cyclical or high-beta stocks could remain under pressure.
Technical Outlook
From a technical perspective, the Nifty continues to show signs of weakness. According to Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, the formation of a long bearish candle on the daily charts with a minor lower shadow suggests a decisive downside breakout. “The short-term trend of the Nifty remains down, and there is a likelihood of further weakness in the near term. The next crucial support level to watch for is around 23,500, which coincides with the 200-day Exponential Moving Average (EMA). Any bounce-back from this level could face strong resistance around the 24,200 mark,” he said.
For the Bank Nifty, which has also been under pressure, the range is expected to be between 52,500 and 50,500, with a negative bias. Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas, highlighted that the crucial support for the Bank Nifty lies around the 50,720 – 50,600 levels, while resistance is placed at 51,750 – 51,800.
What Lies Ahead: Cautious Approach Recommended
Given the ongoing global uncertainty, the FII sell-off, and the mixed earnings performance, market participants are advised to remain cautious. VK Vijayakumar of Geojit Financial Services suggests that investors should consider adopting a safe strategy by remaining invested in defensive stocks and gradually accumulating stocks in segments that are likely to weather the current volatility.
Stocks in the financial services sector, particularly leading private banks and auto stocks like Eicher Motors and Mahindra & Mahindra (M&M), which have exhibited strong earnings momentum, could be attractive in the medium to long term, he noted.
On the other hand, analysts like Prashanth Tapse of Mehta Equities recommend selective stock picking for short-term opportunities. Stocks like Lupin and Bank of Baroda, which have shown promising fundamentals, are viewed positively for traders with a short-term horizon.
Conclusion
Indian markets are facing a challenging phase, with global risks, FII selling, and weak earnings growth overshadowing the domestic landscape. While some sectors like metals and FMCG have shown resilience, the overall market sentiment remains subdued, and further weakness cannot be ruled out in the near term. Investors are advised to adopt a cautious stance, focusing on stocks with strong fundamentals and the potential to navigate through the ongoing volatility.
As the week progresses and with key global events on the horizon, market participants will likely continue to remain on edge, closely monitoring developments related to the U.S. election and the Fed’s monetary policy decisions, which could have far-reaching implications for markets worldwide.
