Stocks turned jittery on Monday morning amid uncertainty over the US elections, as the Republican Donald Trump was neck-to-neck with Democrat Kamala Harris in the presidential race. A drop in FY25 earnings estimates for India Inc, strong foreign outflows, a record low rupee and a rise in oil prices due to delays in OPEC+ output hike due to geopolitical tensions triggered selling pressure in domestic stocks.
The BSE Sensex fell 869.16 points, or 1.09 per cent, to trade at 78,854.96. The NSE Nifty traded at 24,036.90, down 267.45 points or 1.1 per cent. Reliance Industries Ltd, ICICI Bank Ltd and Infosys Ltd contributed most to the index fall.
"The Indian market is facing headwinds from decelerating earnings growth. Nifty's FY25 EPS growth as indicated by Q2 results may dip below 10 per cent in FY25, which will render the present valuations of about 24 times estimated FY25 earnings, difficult to sustain. FIIs may continue to sell in this difficult earnings growth environment, constraining any rally in the market," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Remaining invested in fairly valued largecaps is the safe option for investors in this tough situation," Vijayakumar said.
Data showed FPI sold Rs 1,13,858 crores worth equities in October, which is the single highest absolute selling ever in a month by FPIs. This relentless selling contributed hugely to the about 8 per cent decline in benchmark indices from the peak. Earnings disappointment has a role in the trend.
Among Nifty stocks, BPCL saw a 34.3 per cent downgrade in its FY25 EPS projections since Q2 results, followed by IndusInd Bank (16.7 per cent), UltraTech Cement (15.5 per cent), NTPC (8.3 per cent), Coal India (7.3 per cent), Maruti Suzuki (6.4 per cent), Nestle India (6.1 per cent) and Reliance Industries (5.6 per cent). As of October 31, 34 Nifty stocks reported a sales growth of 5 per cent, Ebitda growth of 1 per cent and nil growth in PAT growth. Of these, 10, surpassed and nine companies missed PAT estimates, MOFSL said. On the Ebitda front, eight companies exceeded while seven missed MOFSL's estimates for the quarter.
In the case of US elections, a Trump win could trigger a short-term rally but analysts are unsure if such a rally would sustain.
"A Democratic Sweep could trigger a fresh wave of selling and a significant correction from here (5 per cent) should be bought into - the impact on the Indian economy and markets is marginal. The medium term play for India may not differ in either Democrat or Republican regime," Emkay Global said.
Elections in the US will be held on November 5.
Rupee is hovering around its all-time low of 84.1 against the dollar in Friday's session. A weaker currency may trigger further foreign outflows.
On Monday, Brent crude oil futures rose 2 per cent to $74 a barrel after OPEC+ delayed its December production increase by a month amid tensions in the Middle East. There are also concerns over flaring up of Iran-Israel hostility, which may influence crude oil prices ahead.
"We believe as the world navigates the imminent period of higher growth and inflation variability in the world, and probably redefine the conventional investing playbook, the India investing strategy may be no different, even as she enjoys some structural growth levers vs EM peers," Emkay Global said.
Ajit Mishra – SVP, Research, Religare Broking said the market is expected to remain sensitive to foreign fund outflows and a subdued earnings season. Investor attention will also be on developments in US markets, especially the upcoming US elections on November 5 and the Federal Reserve’s policy meeting on November 8," he said.