Benchmarks end lower for 2nd straight day amid foreign fund outflows

Extending losses to the second straight day, Indian equity benchmarks ended sharply lower on Tuesday due to a widespread sell-off driven by massive foreign fund outflows and sluggish global markets.  A weak earnings growth trend also hit investor sentiment. Markets made a slightly positive start as traders took support with the Reserve Bank of India's article on 'State of the Economy' published in the October Bulletin stating that India's growth outlook is supported by robust domestic engines and private investment showing some encouraging signs despite geopolitical tensions. Some support also came in as the money put in by Overseas Indians in non-resident Indian (NRI) deposit schemes doubled to $7.82 billion between April and August, 2024 from $3.74 billion put in these schemes during the same period in 2023. However, buying proved short-lived as markets soon slipped into red as traders turned cautious with exchange data showing that foreign institutional investors (FIIs) offloaded equities worth Rs 2,261.83 crore on October 21.  

Markets extended losses in late afternoon deals and settled near days low points as some cautiousness came with latest bulletin from the Reserve Bank of India stating that India's inflation is on a downward trajectory, but there is still significant ground to cover. The final stretch of disinflation hinges on controlling food inflation and mitigating its spillover effects on inflation expectations and core inflation. Traders took a note of private report stating that the Indian economy could grow between 7-7.2 per cent in the current fiscal on strong government spending, and higher manufacturing investments, but a tempered global growth will impact the outlook for the next fiscal. Invertors overlooked Finance Minister Nirmala Sitharaman’s statement that India is poised to continue its sustained growth trajectory and enhance its contribution to global growth significantly. She also noted that at the current rate, India is likely to be the world's third-largest economy by 2027. 

On the global front, European markets were trading lower amid rising inflation expectations and concerns over U.S. fiscal deficit. Asian markets ended mostly down on Tuesday as traders grappled with heightened tensions in the Middle East and uncertainty over the U.S. election outcome that's less than two weeks away.  Back home, on the sectoral front, stocks related to Textiles & Apparel sector were in watch as ratings agency ICRA stated that Indian apparel exporters are expected to register a 9-11 per cent revenue expansion in current fiscal (FY25) aided primarily by gradual liquidation of retail inventory in key end markets and a shift in global sourcing to India.

Finally, the BSE Sensex fell 930.55 points or 1.15% to 80,220.72, and the CNX Nifty was down by 309.00 points or 1.25% to 24,472.10. 

The BSE Sensex touched high and low of 81,504.24 and 80,149.53 respectively. There was 1 stock advancing against 29 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 2.52%, while Small cap index was down by 3.81%.

The top losing sectoral indices on the BSE were PSU down by 3.55%, Industrials down by 3.51%, Realty down by 3.29%, Metal down by 2.99% and Capital Goods down by 2.95%, while there were no gaining sectoral indices on the BSE. 

The lone gainer on the Sensex was ICICI Bank up by 0.67%. On the flip side, Mahindra & Mahindra down by 3.79%, Tata Steel down by 2.94%, Power Grid Corporation down by 2.92%, SBI down by 2.91% and Tata Motors down by 2.64% were the top losers.

Meanwhile, Finance Minister Nirmala Sitharaman has said that India is poised to continue its sustained growth trajectory and enhance its contribution to global growth significantly. She also noted that at the current rate, India is likely to be the world's third-largest economy by 2027. While addressing the Roundtable on 'Investment Opportunities in India' at the New York Stock Exchange, Finance Minister shared the contours of various policy reforms and initiatives that are shaping India, with a focus on the Government's priorities for facilitating sustained economic growth for sustained long-term investment opportunities.

Besides, observing that India's emergence as one of the fastest-growing economies in the world which has witnessed a profound positive transformation in the last 10 years, she emphasized on the nation's determination to not just contribute to but also determine the shape and direction of global recovery, while redefining its own place in the global economic order. As India undergoes this transformation, she exuded confidence that there will be a host of opportunities for growth and returns for investors in India. 

Anchoring India's growth in the vision of Atmanirbhar Bharat, she said that it seeks to reinvigorate India's manufacturing abilities and integrate it with the redefining Global Supply Chains. She further said that India has not only created a strong baseline for infrastructure creation and development with initiatives such as the National Infrastructure Pipeline (NIP) and the National Monetisation Pipeline (NMP), but also bolstered the manufacturing sector's competitiveness through Production Linked Incentive (PLI) schemes across sectors.

Sitharaman referred to India's ground-breaking structural reforms for a stable regulatory framework for investors, such as simplifying the tax structure through the Goods and Services Tax (GST); streamlining the resolution of distressed assets through the Insolvency and Bankruptcy Code (IBC); liberalising Foreign Direct Investment FDI norms across various sectors; and enhancing the simplicity and transparency of the overall foreign investment policy framework. Further, Minister underlined that these policy reforms and initiatives are built on an entirely new digital economy, spurring innovation and tech entrepreneurship resulting in India becoming the 3rd largest start-up ecosystem globally, with over 100 unicorns engaged in innovations for the public good.

The CNX Nifty traded in a range of 24,882.00 and 24,445.80. There were 3 stocks advancing against 47 stocks declining on the index. 

The top gainers on Nifty were ICICI Bank up by 0.74%, Nestle India up by 0.10% and Infosys up by 0.04%. On the flip side, Bharat Electronics down by 3.79%, Mahindra & Mahindra down by 3.63%, Coal India down by 3.36%, Adani Enterprises down by 3.29% and SBI down by 2.97% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 55.22 points or 0.66% to 8,263.02, France’s CAC fell 54.01 points or 0.72% to 7,482.22 and Germany’s DAX lost 63.84 points or 0.33% to 19,397.35.

Asian markets ended mostly down on Tuesday pressured by mixed Wall Street signals overnight and rising bond yields as investors reined in expectations for bigger US interest rate cuts and caution ahead of the US presidential election. Meanwhile, persisted middle-east worries also weighed on Asian shares. Japanese shares declined amid concerns that the ruling party may lose its outright majority in the lower house in October 27 election. Although, Chinese and Hong Kong shares gained after China's central bank PBoC conducted its first operation of the Securities, Funds, and Insurance Companies Swap Facility (SFISF) aiming to leverage the role of financial institutions better in stabilizing China's capital market.