Wed Nov 20 08:36:48 UTC 2024: ## Indian Market Braces for Correction Amidst Record Foreign Sell-Off
**MUMBAI, INDIA** – The Indian stock market is experiencing a significant correction, with benchmark indices falling into correction territory since their September peak, despite record buying by domestic investors. Foreign institutional investors (FIIs) have offloaded a staggering Rs 1.55 lakh crore (approximately $18.7 billion USD) since September 27th, marking the worst outflow ever recorded in a single month. This exodus, fueled by factors including disappointing Q2 earnings, rising inflation, and muted responses to Chinese stimulus, has seen the Nifty index fall by 10.4%.
While FIIs have been selling, domestic institutional investors (DIIs) have stepped in, purchasing nearly Rs 1.5 lakh crore worth of stocks during the same period. Retail investors have also remained remarkably bullish, injecting over Rs 35,500 crore into the market since November 13th. This strong domestic support, analysts say, is preventing a larger market crash and has been a crucial buffer during previous market dips this year.
Prashanth Tapse, senior vice president for research at Mehta Equities Ltd., attributes the retail investors’ optimism to a “fear of missing out” (FOMO) sentiment and belief in India’s long-term growth story. Despite their portfolios currently showing losses, retail investors continue to buy the dip, absorbing much of the selling pressure from FIIs. This aligns with Morgan Stanley’s prediction of a $10 trillion wealth shock by Indian households, which is expected to further support the market.
However, the current correction is raising concerns. Jefferies, a global brokerage firm, has downgraded earnings estimates for over 60% of the 98 companies it tracks, reflecting the impact of the economic slowdown. Valuations, particularly in the mid- and small-cap segments, remain elevated, potentially leaving room for further correction. Tapse suggests that a period of consolidation and correction is likely before a true market bottom is reached. While some foreign investors, like CLSA, have recently shifted their tactical allocation from China to India, citing improved valuations, the overall uncertainty remains a significant factor. The market’s future trajectory will depend heavily on how India addresses the challenges of weaker earnings and inflationary pressures.
First Piper 