Mumbai: Despite signs of an improving domestic economy, foreign institutional investors (FIIs) continued to sell Indian equities benchmarks, causing them to drop for a second week.
The Nifty and Sensex benchmark indices closed at 25,492 and 83,216, respectively, after falling 0.71 and 1.65 percent over the course of the week.
The decrease was caused by sectoral weakness in IT and metals, as well as waning prospects of a Fed rate cut and cautious investor sentiment amid conflicting global cues.
“Select sectors found support from upbeat Q2 earnings, with PSU banks remaining in focus due to robust financial performance, improving asset quality, and renewed speculation regarding a potential FDI cap hike and sector consolidation,” said Vinod Nair, Head of Research, Geojit Investments Limited.
The buy-on-dips strategy seems logical, according to analysts, since the majority of Nifty 50 businesses’ reported results so far have mostly matched projections, and ongoing policy support is anticipated to sustain current premium valuations and maybe spur profit upgrades.
Analysts claim that the dramatic drop in earnings growth in FY25 to 5% stretched the valuations, making the Indian market among the most costly in the world.
FIIs sold in India and transferred funds to other less expensive markets as other emerging markets and some developed markets became appealing with low valuations, he continued.
The Nifty is now trading at 20 times FY27 projected earnings, which is marginally higher than the average PE ratio for the previous ten years. Even though the broader market valuations are still high, analysts indicated that India’s greater long-term growth potential justifies the current valuations.
They stated that the 25,400 area is currently the Nifty’s support, and the 25,600 area is its resistance.
In the meantime, India is showing indications of strong economic development and a comeback in earnings. FIIs will decrease selling and eventually become purchasers when leading signs support this trend.
Future domestic inflation data, FII flows, developments around the US government shutdown, and the status of trade talks between the US, India, and China will all influence the direction of the market next week.
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Infographics: Pinaki Paul/IANS
