Bloodbath on the Street

The domestic markets experienced a sharp losing streak as foreign institutional investors offloaded equities worth Rs 68,000 crore during the fortnight 

The last fortnight proved to be one of the most challenging periods for the Indian markets, with benchmarks experiencing a sharp five-day losing streak, plunging nearly 6 per cent. This decline was driven by a massive selloff from foreign institutional investors (FIIs), who offloaded equities worth over ₹68,000 crore during this time. This substantial withdrawal was largely triggered by escalating geopolitical tensions in the Middle East and a shift in capital flows towards China, following its stimulus measures that attracted global investors.

With the Indian markets trading at record highs and considered overvalued, investors redirected their funds to China in pursuit of higher returns. Domestic institutional investors (DIIs), confident in the long-term growth prospects of the Indian market, seized the opportunity to buy stocks at discounted prices. Their inflow of around ₹64,400 crore provided the much-needed support to the markets during this period. Despite the support, Indian benchmarks, namely, BSE Sensex and Nifty 50, registered declines of 4.90 per cent and 4.64 per cent, respectively.

The broader markets also tumbled in line with the main indices but managed a quicker recovery. The BSE Small-Cap index, after bouncing back from its losses, ended down by 0.86 per cent, while the BSE Mid-Cap index saw a decline of 2.13 per cent during the period. On the sectoral front, most of the indices slipped deep into the red, with sectors such as real estate, oil and gas, fast-moving consumer goods and banking sectors experiencing the most significant losses, each plunging around 5-7 per cent. The indices for healthcare and information technology were the only exceptions to this trend.

The IT sector sustained stable investor sentiment, contrasting sharply with the rapid profit booking observed in the other sectors. According to expert estimates and brokerage reports, Indian IT companies are projected to post single-digit revenue growth in the range of 4-6 per cent for the quarter ending September 30, 2024, with expectations of positive outlooks for the remainder of FY25. The earnings season kicked off with Tata Consultancy Services (TCS) reporting lacklustre results that highlighted weak operational performance, declining margins, and minimal signs of recovery.

The company’s consolidated net profit for Q2FY25 fell by more than 1 per cent quarter-on-quarter, missing street estimates, while its revenue increased by 2.6 per cent to ₹64,259 crore, also falling short of projections. Given the current risks posed by heightened global geopolitical tensions, adverse weather events, financial market volatility, and the recent rise in global food and metal prices, the RBI’s Monetary Policy Committee has decided to keep the policy repo rate unchanged at 6.5 per cent. Stay tuned for more updates and insights on Q2 earnings!