• Despite a significant sell-off by foreign portfolio investors (FPIs), the Indian stock market remains resilient.
• FPIs have shown interest in the primary market, purchasing shares worth Rs 17,145 crore.
• Market experts predict continued FPI selling due to weakened market sentiment influenced by global tensions and US election uncertainty.
• Despite challenges, strong domestic macros and manufacturing sector resilience suggest a positive market outlook.

The Indian stock market has demonstrated remarkable resilience in the face of a significant sell-off by foreign portfolio investors (FPIs). As of October 24, the cumulative FPI selling in equity through Indian stock exchanges reached Rs 102,931 crore.

This development follows the withdrawal of Rs 20,024 crore from Indian equities by FPIs last week, leading to a decline in the main indices, Nifty and Sensex, by 2.7 per cent and 2.2 per cent, respectively.

Despite the sell-off in the secondary market, FPIs have shown interest in the primary market, purchasing shares worth Rs 17,145 crore during this period. This substantial investment was facilitated by several large IPOs. After accounting for these primary market purchases, the total FPI sell figure stands at Rs 85,790 crore, according to market experts.

The sustained FPI selling has affected market sentiments, causing an 8 per cent drop in the Nifty from its peak. Market experts predict that FPIs are likely to continue their selling in the near term due to weakened market sentiment, which has been influenced by escalating tensions in the Middle East and uncertainty surrounding the outcome of the US presidential elections.

Impact of Global Factors on Indian Market

FPIs have been consistent sellers throughout October in the cash market. The current wave of FPI selling was triggered by Chinese stimulus measures and the attractive valuations of Chinese stocks. The high valuations in India have made it the preferred choice for FIIs to sell.

However, the escalating conflict between Iran and Israel is a cause for concern. If the situation worsens, it could significantly affect global crude oil prices, as Iran is a major oil producer. A sharp rise in oil prices may hinder central banks' rate-cutting trajectory, as higher inflation could pose challenges to economic recovery.

Despite these challenges, the domestic macros are largely favouring the market. This is evident from the strong Purchasing Managers' Index (PMI) data and the robust economic growth forecast by the Reserve Bank of India (RBI) for FY25.

Positive Outlook Amid Challenges

The resilience of recent manufacturing data suggests the possibility of an economic recovery in H2 FY25, which should encourage investors to accumulate quality stocks. Market watchers believe 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.

However, market participants are expected to remain cautious in the near term due to the upcoming US presidential elections and the escalating tensions in the Middle East. The broader markets have been hit hard, with the Nifty Midcap 100 and Smallcap 100 indices down by 5.75 per cent and 6.5 per cent, respectively.

Despite the challenges, India's manufacturing industry regained growth momentum in October, supported by quicker increases in factory production and services activity. India's private sector economy continued to showcase robust growth in October, according to the latest HSBC 'flash' PMI survey compiled by S&P Global.