"Dalal Street Faces Selling Pressure as FIIs Turn Net Sellers Amid US Election Uncertainty"

Selling pressure on Dalal Street escalated during Friday's session, pushing benchmark indices down over one percent. This week has seen the Nifty 50 index drop nearly 3%, with broader markets experiencing even steeper declines.

The Sensex fell by 687 points, or 0.85%, to 79,370, while the Nifty dropped 261 points, or 1.07%, to 24,138.25 shortly after noon. This marked the fifth consecutive decline for both indices, attributed to weak earnings reports, ongoing foreign institutional investor (FII) outflows, and uncertainties surrounding the US elections.

The market sentiment remains bearish, impacted by continued FII selling, disappointing Q2 results, and various global concerns contributing to the sustained selloff.

Foreign institutional investors (FIIs) continued to offload their holdings, negatively impacting market sentiment. On October 24, they sold equities worth Rs 5,062 crore, contributing to a total selling spree of nearly Rs 1 lakh crore this month. This wave of selling coincides with rising tensions in the Middle East and a shift in emerging market investment flows towards China following recent stimulus measures. Alongside worries about urban consumption and demand growth, the FII exit is unsettling the stock market and causing investors to be cautious about a potential short-term downturn.

In the lead-up to the U.S. presidential election, U.S. Treasury yields increased this week, contributing to a risk-averse mood in Asia as investors adjusted their outlook on potential rate cuts from the Federal Reserve. Upcoming U.S. economic data, particularly regarding monthly payrolls, is anticipated to provide further insight for investors. Meanwhile, the race between Donald Trump and Kamala Harris appears to be more competitive than expected in key swing states. As investors prepare for possible volatility surrounding the elections, Indian markets are experiencing the consequences of these developments.

On October 25, bank stocks faced pressure in a generally weak market, particularly due to a 20 percent decline in IndusInd Bank shares, which highlighted issues in its micro-finance portfolio and worsening asset quality. Other banks, including AU Small Finance Bank, Canara Bank, PNB, IDFC First Bank, and Bank of Baroda, also experienced significant sell-offs, with declines ranging from 2 to 6 percent.

In addition to IndusInd Bank, Kotak Mahindra, RBL Bank, and AU Small Finance Bank have reported asset quality concerns, noting a notable rise in bad loans primarily driven by difficulties in credit card and microfinance lending.