Sensex falls over 1,000 points as foreign outflows continue; Bajaj Auto dips 5%

The S&P BSE Sensex was down 1,045 points at 78,678.96 at 10:16 am, while the NSE Nifty50 declined 342.35 points to trade at 23,962.

In Short

• Sensex plunges over 1,000 points amid persistent foreign outflows
• Nifty50 trades below 24,000 mark as volatility spooks investors
• Analysts warn of challenges due to weak earnings growth outlook

Benchmark stock market indices experienced a sharp decline on Monday, with the S&P BSE Sensex plunging over 1,000 points due to persistent foreign outflows, weak domestic earnings, and global uncertainties.

In early trade, the Sensex was down 1,045 points, trading at 78,678.96, while the NSE Nifty50 fell 342.35 points to 23,962. The drop impacted broader market indices, with both smallcap and midcap stocks posting significant losses as investor concerns mounted.

The sell-off follows data showing that foreign portfolio investors (FPIs) sold a record-breaking Rs 1,13,858 crore worth of equities in October, marking the largest monthly outflow on record. Analysts attribute the FPI exodus to high valuations and a weaker domestic earnings outlook. Markets have now seen a nearly 8% decline from recent peaks, further pressured by disappointing Q2 earnings reports, particularly among Nifty-listed companies.

Several stocks, including BPCL, IndusInd Bank, UltraTech Cement, and Coal India, faced notable downgrades in their earnings projections. In the recent Q2 earnings season, 34 Nifty companies recorded only modest growth in sales, with EBITDA growth at 1% and net profit remaining stagnant, underscoring a challenging economic environment for Indian corporates.

Adding to the volatility, global events are impacting investor sentiment. Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted the upcoming US presidential election as a critical factor driving market turbulence.

He noted, "In the next couple of days, markets globally will be focused on the U.S. presidential elections, and there can be near-term volatility in response to the election outcome."

He highlighted, however, that fundamentals like US economic growth, inflation, and Federal Reserve policy actions would likely play a more lasting role in shaping global market trends.

Another factor fuelling market unease is rising crude oil prices, which surged 2% on Monday, reaching $74 a barrel. This increase follows OPEC+’s recent decision to delay production hikes amid escalating tensions in the Middle East, notably between Israel and Iran. For India, a net energy importer, rising crude prices translate into higher import costs, which could exacerbate inflation and impact corporate earnings.

The rupee also came under pressure, nearing its all-time low of 84.1 against the dollar. The weakening currency, combined with rising energy costs, adds to the risks of inflationary pressures in India. This depreciation could further affect foreign investor sentiment, as it erodes the returns on dollar-denominated investments.

The top five gainers on the Nifty50 were M&M, Tech Mahindra, Cipla, Dr Reddy's, and IndusInd Bank, while Bajaj Auto, Hero MotoCorp, Sun Pharma, BPCL, and Reliance were among the top losers.

Looking ahead, analysts suggest investors focus on large-cap stocks with fair valuations to mitigate risks in this volatile environment. Dr. Vijayakumar advises that “remaining invested in fairly valued largecaps is the safe option for investors in this tough situation,” suggesting a cautious approach amid ongoing market challenges.

While markets may face short-term turbulence, the long-term outlook will hinge on both domestic economic policies and broader global trends, leaving investors closely watching structural factors shaping the Indian economy.