Daijiworld Media Network - New Delhi
New Delhi, Oct 3: Indian equities may remain range-bound or slip further in October following one of the sharpest monthly sell-offs in recent years, with the Nifty falling nearly 6 per cent in September and recording its eighth consecutive weekly decline, analysts said.
The eight-week losing streak marked the longest such run for the benchmark index in 25 years.
Analysts said global factors, including higher US bond yields, a firm dollar, elevated crude oil prices and weakness in the rupee, are likely to remain the biggest headwinds for the domestic market.
While October could bring some stability, a sustained recovery is unlikely in the immediate term, they said.
Festival demand, government spending and the beginning of the earnings season could provide support to large banks, select manufacturing companies and domestic consumption-linked stocks. However, foreign inflows are expected to remain muted.
Analysts said a broad-based recovery over the next three months would depend more on crude oil prices and US yields than domestic demand alone.
The Nifty and Sensex fell sharply through September as foreign investors stepped up selling, crude prices remained elevated, the rupee came under pressure and US bond yields climbed above 5 per cent.
The 50-stock Nifty fell in each of the last four trading sessions of the week and ended 3.1 per cent lower at 22,422 on Thursday.
Foreign institutional investors (FIIs) also remained net sellers in the domestic market during the past week, offloading shares worth Rs 34,970 crore. FIIs sold heavily in September, ending their two-month buying streak and taking their year-to-date outflows beyond Rs 2.5 lakh crore.
While domestic liquidity could cushion the downside, a sustained recovery would remain difficult if foreign selling continues, experts said.
Several analysts forecast a recovery by December, with large-cap stocks expected to lead any rebound. They advised investors to focus on domestic earnings, reasonable valuations and companies with strong balance sheets, while noting that mid- and small-cap stocks may take longer to deliver profits.
They also said the sustainability of any recovery would depend on second-quarter earnings, with investors closely watching top-line growth, margins and management commentary.
Weak monsoon conditions in several states could also weigh on market sentiment, analysts said.