Mumbai: After hitting their 52-week highs of 85,290 (Sensex) and 26,104 (Nifty 50) on October 23, Indian equity markets faced a sharp pullback as investors indulged in profit booking across sectors. The rally that had been fuelled by strong Q2 earnings, resilient GDP growth expectations, and optimism around an India–US trade deal, has now cooled amid renewed global and domestic uncertainties.
While corporate performance remains broadly in line with expectations, sectors such as oil marketing companies (OMCs) and metals have outperformed. According to Kotak Securities, “Aggregate earnings are ahead of our estimates, with metals, mining, and OMCs driving the beat in the Kotak Institutional Equities (KIE) universe earnings print.”
On the macroeconomic front, conditions appear favourable — inflation is projected to stay low and the RBI recently cut its FY26 inflation forecast to 2.6% while raising GDP growth estimates to 6.8%. Lower crude prices and a healthy monsoon are expected to support rural demand and overall growth momentum.
However, despite these positives, the markets remain under pressure. High valuations, earnings downgrades, and foreign investor outflows have weighed heavily on sentiment. Since July, FIIs have withdrawn nearly ₹1.4 lakh crore from Indian equities in the cash segment.
Explaining the trend, Pankaj Pandey, Head of Research at ICICI Securities, said, “We’re witnessing a clear case of sector rotation. FII flows are still inconsistent, which is why the earlier rally driven by private sector banks, autos, and IT has now shifted to other pockets.”
Adding to investor anxiety are political and trade-related uncertainties. The upcoming Bihar Assembly elections and the lack of progress on the India–US trade deal have dampened market sentiment. “There’s anxiety around the Bihar elections and the stalled trade talks, both of which have contributed to the current volatility,” Pandey noted.
Despite the pullback, analysts remain optimistic about India’s long-term growth story. Nandish Shah of Motilal Oswal believes that continued domestic reforms and easing trade tensions could help the markets regain momentum. “The government’s ongoing reform measures are expected to reset the corporate earnings trajectory, while any resolution of the tariff stalemate with the US will serve as a key external catalyst,” he said.
For now, investors are advised to stay cautious as the market digests recent gains. A sustained rally will likely depend on foreign capital returning, clarity on policy fronts, and stabilization in global markets.
Originally published on 24×7-news.com.
