India Stock Market Outlook: Focus on Q2 Earnings and FPI Trends

After a range-bound consolidation in the past trading week, the Indian stock market remains sensitive to foreign portfolio investor (FPI) outflows and a modest earnings season, according to market analysts. With the U.S. presidential race between Kamala Harris and Donald Trump intensifying and the Federal Reserve’s policy meeting on November 8, Indian investors are closely watching U.S. market developments.

On the domestic front, investors are focusing on earnings reports from major companies, including Dr. Reddy’s, Titan, Tata Steel, M&M, Tata Motors, and Asian Paints, which are expected to provide insights into corporate performance. Additionally, economic indicators like the HSBC Manufacturing PMI, Composite PMI, and Services PMI will be important for gauging India’s economic momentum, says Ajit Mishra, SVP of Research at Religare Broking Ltd.

Market Performance and Foreign Investor Trends

Reflecting on the market’s recent performance, V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that the Nifty index yielded a 25% return over the last Samvat year, with the Nifty 500 up 30%. However, October saw a 6.2% correction, raising concerns among investors. “With India’s high valuations and slower earnings growth, FPI selling may persist, impacting indices,” he advised, suggesting that investors should consider stocks with strong Q2 earnings and clear growth prospects.

In October, FPIs turned net sellers, offloading stocks worth a record Rs 94,017 crore—the highest in a single month. Previously, they had been net buyers, purchasing stocks worth Rs 26,565 crore in June, Rs 32,365 crore in July, Rs 7,320 crore in August, and Rs 57,724 crore in September. FPI inflows had significantly supported the market rally, except for this recent sell-off.

The benchmark indices saw notable volatility last week, with gains capped by weak global cues and lackluster earnings. The Diwali special trading session on Friday offered a positive boost, with both the Nifty and Sensex closing in the green at 24,304.30 and 79,724.12, respectively. Sectors like metals, real estate, and banking showed strength, while IT declined nearly 4% after several weeks of gains. Broader indices outpaced benchmarks, with the small-cap index rising over 5%.

Outlook for the Week Ahead

With the ongoing earnings season, investors are set to review financial results from companies such as IRFC, GAIL, Tata Steel, Trent, and Asian Paints in the coming week. As the market continues to respond to both global and domestic factors, stock-specific strategies are expected to be key for investors amid fluctuating FPI activity and ongoing economic assessments.