Indian stock markets experienced a significant drop on Monday.
(Photo : BT Creative)
Indian stock markets experienced a significant drop on Monday.
  • Despite a recent downturn in the Indian stock market, economic indicators suggest future growth and stability.
  • The manufacturing industry shows robust growth, backed by strong data from the Purchasing Managers' Index.
  • Despite challenges, experts suggest potential positive traction, especially with the festive season approaching.
  • The market is expected to recover, supported by strong domestic macroeconomic factors and the resilience of the Indian economy.

The Indian stock market recently experienced a significant downturn, with the Sensex and Nifty indices falling by 2.2% and 2.7% respectively. This decline, however, does not necessarily reflect the overall health of the market. Despite the turbulence, domestic macroeconomic factors continue to favor growth and stability, painting a promising picture for the future of the Indian economy.

The Purchasing Managers' Index (PMI), a key indicator of economic health, unveiled strong data, suggesting a robust manufacturing industry. This, coupled with the Reserve Bank of India's (RBI) optimistic economic growth forecast for FY25, signals confidence in the country's economic trajectory despite the recent market downturn.

The manufacturing industry, a critical component of India's economy, regained its growth momentum in October. This acceleration was bolstered by increases in factory production and services activity, indicating a robust private sector economy. The HSBC 'flash' PMI survey compiled by S&P Global further corroborated this growth, showcasing the continued robustness of India's private sector economy in October.

Challenges and Opportunities Amid Market Downturn

However, the week was not without its challenges for investors and traders. Markets witnessed a broad-based sell-off, with the Nifty closing down by over 2.65%, slipping below 24,200 after two weeks of consolidation. Rajesh Bhosale, Equity Technical Analyst at Angel One, noted that October had been particularly tough, with the benchmark down more than 6% so far. Individual stocks, particularly in the mid-cap segment, were hit hardest, experiencing a sharp decline over the last couple of weeks.

Despite the steep drop in mid-caps, market experts suggest that selective positive traction could emerge, especially with the festive season. Investors with a long-term view might consider staggered buying of quality stocks from these levels. However, investor psychology has been somewhat gloomy due to ongoing geopolitical tensions and a knee-jerk reaction from Foreign Institutional Investors (FIIs), which has dampened sentiment.

The sustained selling by FIIs and a lack of triggers in the domestic market may impact near-term sentiment. However, the resilience of recent manufacturing data suggests the plausibility of an economic recovery in H2 FY25, which should encourage investors to accumulate quality stocks.

Looking Ahead: Market Resilience and Recovery

Market experts suggest that a moderation in valuation, a pickup in earnings in H2 FY25, and an expectation of an RBI rate cut in 2025 will provide support to the market. Sectors to watch include consumption, FMCG, infrastructure, new-generation companies, manufacturing, and chemicals.

On Friday, the Sensex closed at 79,402.29 after falling 662.87 points or 0.83%. At the same time, Nifty fell 218.60 points or 0.9% to 24,180.80. This marked a challenging end to a difficult week for the market.

Looking back at historical events, the market has faced similar downturns in the past. However, it has always managed to bounce back, thanks to strong domestic macroeconomic factors and the resilience of the Indian economy. The current situation is reminiscent of the 2008 financial crisis when the market experienced a significant downturn. However, it managed to recover and achieve new highs, thanks to strong domestic factors and global economic recovery.