Indian stock indices experienced a significant drop during early trading on Monday, with the market remaining under pressure as the session progressed. The Sensex plummeted by over 1,000 points, while the Nifty fell by approximately 300 points. Key sectors such as banking, auto, financial services, and real estate were among the hardest hit.
Market expert Ajay Kedia from Mumbai attributed the downturn to ongoing profit booking, escalating geopolitical tensions in the Middle East, and a new wave of Chinese stimulus aimed at attracting foreign direct investment (FDI).
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that the market is likely entering a consolidation phase in the near term. He highlighted the recent outperformance of Chinese stocks, evidenced by a remarkable 18 percent surge in the Hang Seng index throughout September, fueled by expectations of a recovery in the Chinese economy due to monetary and fiscal stimulus from authorities. This trend may lead foreign institutional investors (FIIs) to sell off some of their holdings in India to allocate funds to better-performing markets.
However, Vijayakumar reassured investors that FII selling is not expected to significantly impact the Indian market, as strong domestic investment can readily absorb these sales. He advised investors to consider using dips in the market to acquire quality large-cap stocks that are fairly valued.
On Friday, Indian stock indices had already closed the week marginally lower after reaching six consecutive session highs, likely due to profit booking. Prior to this decline, a recent decision by the US Federal Reserve to cut interest rates by a substantial 50 basis points had provided fresh support for Indian stocks, with lower rates often encouraging capital flows to alternative investment destinations like India. Continued buying from foreign portfolio investors (FPIs) had also positively influenced stock indices, with FPI activity remaining positive for four consecutive months.
