Why Are Nifty and Sensex Declining for the Second Week?
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Synopsis
Indian equity benchmarks, Nifty and Sensex, are experiencing a downturn for the second week despite signs of economic strengthening. With selling pressure from foreign institutional investors and mixed global cues, market analysts suggest a cautious approach while highlighting opportunities in certain sectors.
Key Takeaways
- Nifty and Sensex declined for the second week.
- Ongoing selling by FIIs is a major factor.
- Mixed global cues and weakness in sectors like IT and metals contributed to the downturn.
- Positive Q2 earnings provide some sectoral support.
- Current valuations remain stretched despite India’s growth potential.
Mumbai, Nov 8 (NationPress) The Indian equity benchmarks have experienced a continued downturn for the second consecutive week, primarily driven by persistent selling from foreign institutional investors (FIIs), even amid signs of a strengthening domestic economy.
During the week, the benchmark indices Nifty and Sensex recorded declines of 0.71 and 1.65 percent respectively, closing at 25,492 and 83,216.
The fading expectations of a potential Fed rate cut further exacerbated cautious investor sentiments, while mixed global cues and weakness in the IT and metals sectors contributed to this decline.
“Certain sectors received a boost from positive Q2 earnings, with PSU banks in the spotlight due to strong financial performance, improved asset quality, and renewed speculation regarding a possible FDI cap increase and sector consolidation,” stated Vinod Nair, Head of Research at Geojit Investments Limited.
Analysts believe that a buy-on-dips strategy might be sensible, as results from the majority of Nifty 50 companies released thus far have closely aligned with expectations, and ongoing policy support is anticipated to sustain current premium valuations and possibly lead to earnings upgrades.
Furthermore, analysts noted a significant drop in earnings growth for FY25, projected at 5 percent, which has stretched valuations, making the Indian market one of the most expensive globally.
As other emerging and some developed markets present more attractive low valuations, FIIs have been selling in India and reallocating funds to these cheaper markets.
The Nifty is presently trading above 20 times FY27 estimated earnings, slightly exceeding the last 10-year average PE ratio. Analysts assert that due to India's superior long-term growth potential, these current valuations can be justified despite the broader market's elevated valuations.
Currently, support for the Nifty is near the 25,400 zone, whereas resistance is observed around 25,600.
Amidst this, there are indications of strong economic growth and earnings recovery in India. As leading indicators reinforce this trend, FIIs are expected to reduce selling and eventually shift to buying.
Looking ahead to next week, market direction will hinge on forthcoming domestic inflation data, FII flows, developments concerning the US government shutdown, and progress in trade negotiations among the US, India, and China.
Point of View
It's crucial to remain impartial while observing the ongoing market fluctuations. The current trends suggest a complex interplay of domestic and global factors affecting the Indian equity landscape. Despite the recent downturn, the underlying strength of the economy and potential policy support may offer opportunities for discerning investors.
NationPress
10/11/2025
Frequently Asked Questions
What caused the decline in Nifty and Sensex?
The decline in Nifty and Sensex is primarily due to ongoing selling by foreign institutional investors, mixed global cues, and weakness in the IT and metals sectors.
How are the Indian markets performing compared to global markets?
Currently, Indian markets are considered expensive compared to other emerging and some developed markets, which are offering more attractive valuations.
What should investors consider during this downturn?
Investors may consider a buy-on-dips strategy, as many Nifty 50 companies have reported earnings in line with estimates, and continued policy support is expected.
What is the outlook for the Indian economy?
Despite the current market challenges, there are signs of robust economic growth and earnings recovery in India, which could attract foreign institutional investors back into the market.
What factors will influence the market direction next week?
Next week's market direction will be influenced by domestic inflation data, FII flows, US government shutdown developments, and trade negotiations involving the US, India, and China.
