A Slippery Way Down

Benchmarks remained range-bound with a downward tilt as FIIs persisted with their selling, accumulating a total of  ₹34,000 crore in outflows over the fortnight

Over the past two weeks, Indian benchmark indices have experienced a roller-coaster of fluctuations, marked by frequent ups and downs yet confined to a narrow range, showing minimal shifts on either side compared to the earlier trading sessions. During the period, the BSE Sensex inched up by 0.11 per cent, while the Nifty 50 index slipped by 0.13 per cent. FIIs continued their selling spree, offloading equities worth ₹34,000 crore during the fortnight.

While DIIs had been supporting the market by investing a similar amount, they lagged this time, with a shortfall of around ₹10,000 crore. Surprisingly, the broader market showed signs of recovery after an intense sell-off. The BSE Small-Cap index led the gains, climbing around 5 per cent, helping restore a degree of much-needed investor confidence. Meanwhile, the BSE Mid-Cap index gained 1.38 per cent. Sectoral performance was mixed, with healthcare, banking and information technology stocks standing out as strong performers, while real estate, oil and gas, and power sectors continued to show weakness.

The healthcare sector kept investor sentiment optimistic, as companies reported impressive top-line and bottom-line growth, standing out amid generally weak Q2 earnings across several other sectors. Donald Trump’s return as US’ president for a second term has buoyed banking sector stocks, fuelled by investor expectations of reduced corporate tax rates, favourable tariffs, and further deregulation. Meanwhile, the domestic IT stocks tracked a robust rally in Wall Street’s technology sector, following the Federal Reserve’s announcement of an additional 25 basis-point rate cut during its policymeeting, building on an earlier 50 basis-point reduction.

Similarly, energy markets are closely monitoring the potential impact of Donald Trump’s presidency on oil and gas prices. Experts suggest his policies could significantly affect global crude oil prices, with a higher likelihood of a decline, which could help reduce inflation. Consumer inflation in India surged from 3.65 per cent in August to a nine-month high of 5.49 per cent in September, primarily due to rising food prices. RBI Governor Shaktikanta Das has indicated that October’s CPI could remain elevated, potentially surpassing September’s figure.

As a result, the Reserve Bank of India (RBI) has refrained from cutting interest rates, primarily due to escalating geopolitical tensions in the Middle East, concerns over disrupted oil supplies, and already elevated inflation levels. Shaktikanta Das recently emphasised that the RBI will prioritise growth support, but any decision to cut rates will depend on inflation consistently approaching the central bank’s 4 per cent target. According to an SBI research report, the Indian rupee, which recently hit an all-time low, could depreciate by 8-10 per cent against the US dollar during the Trump 2.0 administration.