Indian shares log worst month since March 2020 on record foreign outflows, dull earnings

Indian shares fell on Thursday, logging their worst monthly performance since March 2020, as record monthly foreign outflows and lacklustre corporate earnings pummelled investor sentiment.

The NSE Nifty 50 fell 0.56% to 24,205.35, while the BSE Sensex lost 0.69% to 79,389.06.

Both the benchmarks lost about 6% in October, their worst monthly performance since March 2020 when COVID-19 lockdowns spurred a sharp slide across global markets.

The indexes also snapped a four-month winning streak during which they gained about 15%, helped by policy continuity after India’s national elections and on macroeconomic stability.

“China’s stimulus announcement which triggered record monthly foreign outflows from Indian shares and slowing earnings momentum together piled the pressure on Indian markets in October,” MRB Partners, a global investment research firm, said in a note.

Foreign institutional investors (FII) were net sellers of Indian shares for 23 straight sessions until Wednesday and dumped stocks worth $11 billion (918.19 billion rupees) in October, the highest monthly outflow on record.

Indian shares set to open little changed

“The key monitorable for markets is how FIIs position themselves in November after this month’s carnage,” said Ajit Mishra, senior vice president of research at Religare Broking said.

Auto and consumer stocks fell 13% and 10% in October and were among the biggest monthly losers, hurt by weak quarterly earnings by key constituents like Maruti Suzuki and Hindustan Unilever as well as worries over the demand outlook.

The broader, more domestically focussed small- and mid-caps dropped 3% and 6.7%, respectively, in October.

IT stocks declined 3% on Thursday, leading losses on the benchmark, as the index tracked a global selloff in technology shares.

In terms of losses, the IT index has shed about 3.7% this month, mainly due to losses on Thursday, compared to a 6.2% drop in the Nifty 50.

“The uncertainty around U.S. presidential elections on Nov. 5 could keep Indian markets under pressure and trigger further volatility in the next few sessions,” said Siddhartha Khemka, head of research of wealth management at Motilal Oswal Financial Services.

The volatility index spiked about 22% in October to 15.55, its sharpest monthly rise since a 91% jump in May ahead of the outcome of India’s national elections and a 30% rise in February 2022 when Russia invaded Ukraine.

Indian markets will trade in a special session between 6 p.m. IST and 7 p.m. IST on Friday to mark the festival of Diwali.

Normal trading will resume on Nov. 4.