Sell-off Continues in Indian Market; BSE Loses Rs 8.47 Lakh Crore in Market Cap Today

As we have already warned and mentioned, selling momentum continued in the Indian equity market during today’s trade. There was broad-based selling across almost all sectoral indices, with the realty and metal sector stocks seeing sharp declines, losing over 3% each.

On the NSE, as many as 2,295 stocks witnessed selling, while only 236 stocks advanced. The broad-based NIFTY 500 index saw negative breadth, with almost 95% of stocks experiencing selling today, leading the index to drop over 1.83%. The headline NIFTY Index saw sharp selling and fell below the 24,500 mark after breaching the key support range of 24,680-700, as mentioned in yesterday’s report. The Bank NIFTY index fell after failing to hold the 52,000 mark, dropping as much as 1.35% today. The India VIX rose over 4%, suggesting panic in the market.

With today’s selling, the market capitalization of all BSE-listed companies declined by ₹8.47 lakh crore to ₹445.18 lakh crore, which is still higher than the nominal GDP figure, making the Indian market still expensive compared to China, which is quoted far below its nominal GDP.

Overnight, Wall Street indices Dow Jones and S&P 500 declined, while the Nasdaq outperformed. Asian equities declined in early trade today, putting pressure on the Indian market. The Asian NIKKEI index dropped 1.39%, and the KOSPI Index fell around 1.3%. The US Dow index slipped 0.8% or 344 points overnight.

As we have mentioned earlier, corrections are a healthy sign of a bull market, and long-term investors should be happy when there is a correction, as the long-term story of India remains intact despite some not-so-encouraging Q2 earnings from Indian corporates.

As China slows, the room for further monetary and fiscal stimulus is on the cards. The Chinese market, as per the market cap/GDP ratio, is far undervalued compared to India. China’s market cap to GDP was around 65% at the start of FY25, while India was quoted above 135%, showing high valuation locally. Such high valuation, combined with a lower chance of RBI rate cuts and below-par corporate results, along with geopolitical tension, has led to selling in Indian equities from foreign institutional investors (FIIs). FIIs have sold more than ₹82,000 crore of Indian equities to date during October.

What should investors do now?

The long-term story of India is intact, and after a corrective phase, Indian equities should regain strength. However, it is difficult to determine when the market shall bottom out. A corrective phase is a part and parcel of a bull market and is a healthy sign for long-term investors. The larger index has corrected only 5-6%, and any correction between 10-15% from the high can be considered healthy. For mutual fund investors, it is advisable to stay invested and continue your SIP every month for a long-term investment outlook.

Market Outlook Index for Traders

NIFTY: The index may see further weakness as long as it holds below the 24,550-600 zone, with immediate support at 24,350 and then at the 24,050-24,100 area. Those who are short on the index should start booking profits. The market is just near the 100-day EMA area, but further selling cannot be ruled out.

BANK NIFTY: The index is likely to remain weak intraday below the 51,600-700 range, with immediate support at the 51,000 mark. As most of the bank results are out, one can expect some liquidation in banks, which have been holding for a few days despite the NIFTY slide. The Bank NIFTY has broken a reverse flag formation, which is a continuation of the downtrend, and may see selling trigger further when it breaches the 51,000 mark. Selling on pullbacks is ideal.

NIFTY MIDCAP Select Index: A further round of selling was seen today, with the index falling below its 100-day EMA, facing crucial support at the 12,150-200 zone. As long as the index stays below the 12,600 mark, one can expect weakness, but it may see some short covering at the mentioned support zone. Always remember, midcaps and small caps tend to fall the most during corrective phases.

The report is being prepared by Bitupan Majumdar, an independent SEBI-registered research analyst with registration code INH30006962. Please consult your financial advisor before making any investment decisions.

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