FPI sales in the cash market exceed ₹1 lakh crore.

Sensex drops by 663 points, while Nifty declines by 0.9%.

Indices declined for the fifth consecutive session on Friday, approaching two-and-a-half-month lows due to ongoing selling by foreign portfolio investors (FPIs), disappointing second-quarter earnings, and increasing U.S. treasury yields.

In October, foreign portfolio investor (FPI) selloffs in the cash market surpassed ₹1 lakh crore for the first time in a month, according to provisional data. Year-to-date, investors have sold shares worth over ₹2.2 lakh crore. Contributing factors include high valuations, disappointing domestic earnings, and the trend of "Buy China, Sell India."

Meanwhile, foreign fund inflows into China have continued for five consecutive weeks, totaling $576 million. This is significantly lower than the $2.2 billion seen the previous week and $9.3 billion the week before, as reported by Elara Global Research. In contrast, fund flows into India have slowed considerably, with a modest outflow of $51 million from India-dedicated funds this week, marking the second outflow since March 2023. Midcap funds focused on India have experienced continuous outflows for 16 weeks, beginning in July 2024.

On Friday, the Sensex dropped by 663 points, or 0.8%, closing at 79,402, while the Nifty fell 0.9% to 24,180. This marked the fourth consecutive week of decline for the benchmark indices, which fell 2.7% and 2.2%, respectively. Additionally, mid-cap and small-cap indices saw significant losses of 5.2% and 7.4% over the week.

All indices except FMCG and healthcare closed in the red, with consumer durables, oil and gas, metals, PSU banks, and auto sectors each declining over 2%. The India VIX, a measure of market volatility, surged more than 7% during the day. IndusInd Bank was the worst performer on the Nifty, plummeting 19% after reporting disappointing Q2 results. In contrast, ITC saw an increase of over 2.2% due to its consistent quarterly performance.

Vinod Nair, Head of Research at Geojit Financial Services, stated, “We anticipate that consolidation will persist in the short term; a trend reversal will depend on a slowdown in FPI selling and the results of the U.S. presidential election.”

He noted that Q2 results have been affected by weak demand and margin pressures. However, a moderation in valuations, anticipated earnings growth in H2FY25, and expectations of an RBI rate cut in 2025 could support the market.