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After witnessing a relief rally in the last two trading sessions, the Indian market struggled to maintain its upward momentum during Wednesday's trade, as both frontline indices closed the session in negative territory, pulled down by weakness in the private-sector bank stocks.
Consequently, the Nifty 50 ended the session with a 0.48% dip at 24,349, while the Sensex ended the trade with a drop of 0.51% at 79,958. Meanwhile, both midcap and smallcap indices extended their winning run for the third consecutive trading session, with the Nifty Midcap 100 gaining marginally by 0.13% and the Nifty Smallcap 100 rallying 1.04%.
According to stock market experts, the Indian stock market still faces challenges like potential global instability, a hotly contested US election, interest-rate decisions in the US and Europe, the threat of a wider Middle East conflict, domestic economic pressures, and weak quarterly earnings at home. Such factors are expected to haunt the bulls whenever there is some upside movement. They said the Indian indices like Sensex, Nifty 50 and Bank Nifty are still at premium valuations despite the recent route.
Why today's fall?
On the reasons that are dragging the Indian stock market today, Ajay Garg of SMC Global Securities, said, “The stock market’s inherent unpredictability was demonstrated during Samvat 2080, and as we enter Samvat 2081, a cautious outlook remains crucial. Several challenges could weigh on the Indian stock market, such as potential global instability, hotly contested US election, interest-rate decisions in the US and Europe, the threat of a wider Middle East conflict, domestic economic pressures, and weak quarterly earnings at home."
He noted that "such factors might heighten market volatility and dampen sentiment. However, it's important to consider India's strong long-term growth prospects.”
‘Sell India, buy China’
Pointing towards the ‘Sell India Buy China’ narrative in the market, he said, "Foreign Institutional Investors (FIIs) have been steadily divesting from the Indian stock market, driven by a confluence of domestic and global factors. October witnessed a record-breaking outflow, surpassing even the peak of the March 2020 market crash. The "sell India, buy China" narrative has been amplified by Beijing's recent policy initiatives to revitalise its domestic economy. These measures, particularly the more-than-expected monetary easing, have ignited a significant rally in the Chinese stock market, attracting substantial investor interest."
US presidential election
Anshul Jain of Lakshmi Shree Investment and Securities, said, “Due to the closely fought US polls, big uncertainty is prevailing in the global market. This is also why the Indian stock market could not sustain itself at higher levels after the two days of relief rally. However, this dip should not be taken seriously until the Nifty 50 index exceeds the 24,000 mark.”
Anshul Jain said that the 50-stock index breaching below the 24,000 mark might trigger fresh selling pressure in the Indian stock market, whereas a decisive breakout above 24,700 could trigger a fresh bull trend for Dalal Street investors.
Overvalued market
On whether the Indian stock market is still overvalued despite the recent correction, the SMC Global Securities expert said, “The Indian market, especially the Nifty 50 and Sensex, has traditionally traded at premium valuations compared to other emerging markets. While recent all-time highs may point to some overvaluation, the market's appeal remains strong due to healthy order books and ongoing capacity expansion. However, global economic uncertainties, rising inflation, interest-rate decisions in the US & Europe, the threat of a wider Middle East conflict and the risk of foreign institutional investor (FII) outflows could weigh on the market if earnings growth falls short.”
(By arrangement with livemint.com)
